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IIA CIA Exam
Certified Internal Auditor Exam (Page 40 )

Updated On: 12-Jan-2026
Page 40 of 342
PDF with 1702 Questions

A corporation had profit for the year of US $101, 504 and a simple capital structure consisting of the following ordinary shares outstanding:

What was the corporation's basic earnings per share rounded to the nearest cent)?

  1. US $2.90
  2. US $3.20
  3. US $3.26
  4. US $3.45

Answer(s): B

Explanation:

BEPS equals profit or loss attributable to ordinary equity holders divided by the weighted- average number of ordinary shares outstanding. The latter is calculated as follows:

Accordingly, BEPS is US $3.20 $101, 504 profit - 31, 720 shares).



An entity had 300, 000 shares of ordinary shares issued and outstanding at December 31. Year 1 No shares were issued during Year 2. On January 1, Year 2, the entity issued 200, 000 shares of nonconvertible preference shares. During Year 2, the entity declared and paid US $75, 000 of cash dividends on the ordinary shares and US $60, 000 on the preference shares. Profit for the year ended December 31. Year 2 was US $330.000. What is the entity's Year 2 basic earnings per share?

  1. U3 $1.10
  2. US $0.90
  3. US $0.85
  4. US $0.65

Answer(s): B

Explanation:

BEPS is equal to the amount of profit or loss attributable to ordinary equity holders divided by the weighted-average number of ordinary shares outstanding during the year. To calculate the numerator, dividends on cumulative preference shares must be subtracted from profit or loss whether or not the dividends were declared. Earnings per share for Year 2 thus amounted to US $0.90.



In computing the loss per share of ordinary shares, cumulative preference dividends not earned should be

  1. Deducted from the loss for the year.
  2. Added to the loss for the year.
  3. Deducted from income in the year paid.
  4. Added to income in the year paid.

Answer(s): B

Explanation:

When preference shares are cumulative, the dividend, whether earned or not, is deducted from profit or loss from continuing operations and profit or loss, or added to any loss for the year, in computing earnings or loss. When preference shares are noncumulative, an adjustment is made for dividends declared. If the dividend is cumulative only if earned, no adjustment is necessary except to the extent of available income: that is, the preference dividends accumulate only to the extent of profit or loss.



In the computation of DEPS, which of the following are potential ordinary shares?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): C

Explanation:

Potential ordinary shares are contracts that may entitle holders to obtain ordinary shares_ They include options, warrants, convertible preference shares, convertible debt, and contingently issuable shares. Unlike an option. nonconvertible preference shares are never potential ordinary shares.



Earnings-per-share data must be reported on the face of the income statement for

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): B

Explanation:

EPS data for profit or loss from continuing operations and profit or loss must be reported on the face of the income statement. EPS data for a discontinued operation may be disclosed on the face of the income statement or in a note.



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