An employee's pension payments are based on his salary and length of service. He does not bear the risk of the pension size being affected by market performance. He is enrolled in the:
Answer(s): A
In a defined benefit pension plan, the retirement benefits are "predefined." The employer commits to providing the benefits regardless of the performance of the pension plan. Thus, in this plan, the risk of pension plan performance is borne by the employer and not the employee.
In computing EPS, the equivalent number of shares of convertible preferred stock is added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is preferred as to dividends, which amount should then be added as an adjustment to the numerator (earnings available to common shareholders)?
If a capital structure has convertible preferred stock with a dilutive effect on EPS, the "if-converted" method is used. This method assumes the conversion of the preferred stock occurred at the beginning of the accounting period or at issuance, if later. The annual preferred dividend is added back to earnings available to common shareholders.
If a company estimates that its expected return on pension plan assets will increase to 9.5% from 9.0% this would be considered ________.
Answer(s): B
Such a change is a change in accounting estimate and disclosure is required of the effect on both net income and income before extraordinary items for the current period.
Anti-dilutive securities are those that:
Answer(s): D
Anti-dilutive securities are always excluded from the computation of the Diluted EPS.
Jones company earned $100,000 of pre-tax income in 1998, had $50,000 of pre-tax income in 1997, pays a 40% tax rate and has a dividend payout of 50%. What is the dividend amount declared by Jones Company in 1998?
Answer(s): C
1998 Pre-tax income was $100,000 in 1998. The pre-tax income from the prior year has no relevance to the question. If the company pays a 40% tax rate, they are left with net income of $60,000 for the year. If the dividend payout rate is 50%, the company will declare $30,000 of dividends for 1998.
Post your Comments and Discuss CFA CFA I exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CFA I content, but please register or login to continue.