Question 1. Baldwin Company had 40,000 shares of common stock outstanding on January 1, 20

1. Baldwin Company had 40,000 shares of common stock outstanding on January 1, 2011. On April 1, 2011 the company issued 20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 10,000 shares exercisable at $10 that had not been exercised by its executives. The average market price of common stock for the year was $12.
What number of shares of stock (rounded) should be used in computing diluted earnings per share?

A. 55,000
B. 61,667
C. 65,000
D. 56,667

2. Which of the accounting changes listed below is more associated with financial statements prepared in accordance with U.S. GAAP than with International Financial Reporting Standards?

A. Change in depreciation methods
B. Change to the LIFO method from the FIFO method
C. Change in reporting entity
D. Change in accounting estimate

3. In its 2011 income statement, WME reported $695,000 for service revenue earned from membership fees. WME received $681,000 cash in advance from members during 2011. In its reconciliation schedule, WME should show a

A. $14,000 negative adjustment to net income under the indirect method for the increase in unearned revenue.
B. $14,000 positive adjustment to net income under the indirect method for the decrease in unearned revenue.
C. $14,000 negative adjustment to net income under the indirect method for the decrease in unearned revenue.
D. $14,000 positive adjustment to net income under the indirect method for the increase in unearned revenue.

4. During 2011, Angel Corporation had 900,000 shares of common stock and 50,000 shares of 6% preferred stock outstanding. The preferred stock does not have cumulative or convertible features. Angel declared and paid cash dividends of $300,000 and $150,000 to common and preferred shareholders, respectively, during 2011.
On January 1, 2010, Angel issued $2,000,000 of convertible 5% bonds at face value. Each $1,000 bond is convertible into 5 common shares.
Angel’s net income for the year ended December 31, 2011, was $6 million. The income tax rate is 20%.
What will Angel report as diluted earnings per share for 2011, rounded to the nearest cent?

A. $6.43
B. The correct answer isn’t given.
C. $6.25
D. $6.22

5. On December 31, 2010, Albacore Company had 300,000 shares of common stock issued and outstanding. Albacore issued a 10% stock dividend on June 30, 2011. On September 30, 2011, 12,000 shares of common stock were reacquired as treasury stock. What is the appropriate number of shares to be used in the basic earnings per share computation for 2011?

A. 303,000
B. 312,000
C. 327,000
D. 342,000

6. When a transfer is made between cash and cash equivalents with no gain or loss, how is the transaction treated in the statement of cash flows?

A. It’s included as an operating activity.
B. It’sincluded as an investing activity.
C. It’sincluded as a noncash financing activity.
D. It’s not reported.

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