Question 1:
a. Explain how dividends or dividend requirements on any class of preferred stock that may be outstanding affect the computation of EPS.
b. One of the technical procedures applicable in EPS computations is the "treasury stock method." Briefly describe the circumstances under which it might be appropriate to apply the treasury stock method.
c. Convertible debentures are considered potentially dilutive common shares. Explain how convertible debentures are handled for purposes of EPS computations.
Question 2:
a. What is a stock dividend? How is a stock dividend distinguished from a stock split?
b. For what reason does a corporation usually declare a stock dividend? A stock split?
c. Discuss the amount, if any, of retained earnings to be capitalized in connection with a stock dividend.