The Following Information Was Extracted from Smurm Corporation's 2006 Annual

question 77

Multiple Choice

The following information was extracted from Smurm Corporation's 2006 annual report:
$\begin{array}{l}\begin{array}{|l|r|}\hline\text { Common stock }\\\hline \text { Shares outstanding } 12 / 31 / 05 & 90 \text { Million } \\\hline \text { New shares issued } 4 / 1 / 06 & 10 \text { Million } \\\hline \text { Shares outstanding } 12 / 31 / 06 & 100 \text { Million } \\\hline \text { Preferred stock } & \\\hline \$ 10 \text { par, } 10\% \text {, convertible into } 2 \text { shares of common stock, shares } & \\\hline \text {Outstanding }&50 Million\\\hline \text {Options }\\\hline \text { 1 Million options, each to purchase one common share at \( \$ 50 \) per}\\\hline \text {Share }\\\hline \text {Market price of stock }\\\hline \text { Average for year}& \$ 75 \\\hline \text { Beginning of year}& \$ 70\\\hline \text {End of year }&\$ 78\\\hline \text { Preferred dividends paid}&\$ 50,000,000 \\\hline \text {Net Income for 2006 }&\$ 350,000,000\\\hline\end{array}\end{array}$
-If software refinement had been capitalized each year and amortized over a three year period beginning in the year the cost was incurred, net income for fiscal 2007 would have been:

• A) $31.7M
• B) $29.75M
• C) $21.95M
• D) $14.95M

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Definitions:

Financing Activities

Transactions that result in changes in the size and composition of the equity and borrowings of an entity, as reported in the cash flow statement.

Repayment of Borrowings

The process of paying back borrowed funds to creditors, including the principal amount and any applicable interest.

Statement of Cash Flows

A financial report detailing how variations in income and balance sheet accounts influence cash and cash equivalents, segmented into operating, investing, and financing activities.

Interest Paid

The amount of money paid by a borrower to a lender in return for the use of borrowed funds, calculated as a percentage of the loan amount.