What Variables Are Needed to Calculate Basic Earnings Per Share

question 14

Multiple Choice

What variables are needed to calculate basic earnings per share?

• A)Adjusted earnings after taxes, number of shares outstanding, and number of common shares from all potential securities convertible into common stock
• B)Earnings after taxes and number of shares outstanding
• C)Adjusted earnings after taxes, shares outstanding, common stock equivalents, and all convertibles
• D)Earnings after taxes, common shares outstanding, and all convertible preferred stock

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Definitions:

Premium on Bonds Payable

The amount by which the sale price of a bond exceeds its face value, reflecting higher-than-market interest rates or increased demand for the bond.

Amortization

The process of spreading out a loan or intangible asset cost over a fixed period of time for accounting and tax purposes.

Straight-Line Method

A method of allocating the cost of an asset evenly over its useful life.

Callable Bonds

Securities that the issuer has the option to repurchase before they reach their due date, at a specified call price.