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:

Partnership Agreement

A contract between partners in a partnership which outlines the terms and conditions of the relationship between the partners.

Judgment

A formal decision or order given by a court that resolves a legal dispute between parties and may involve the awarding of damages or the imposition of sanctions.

Partnership Agreement

A legal document that specifies the rights, responsibilities, and share of profits and losses among the partners in a business venture.

Authority

The legal power or right given to an individual or entity to make decisions, conduct transactions, or enforce rules and regulations.