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missminimac
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| Posted: 28 Oct 2010 at 23:25 | IP Logged
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Question: Calculate EPS Diluted.
The problem provides info for -
Common Stock
Preferred Stock convertible 1 into 10 C/S shares.
Bond convertible into 100 C/S shares.
*** This is where it get tricky. Preferred stock and bonds do not convert.
Should I include these in calc for EPS Diluted?
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FAR: 10/28/10 (70)
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nomore74
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| Posted: 29 Oct 2010 at 00:47 | IP Logged
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They dont convert but they are convertible. EPS diluted is "if converted" approach for that reason you should include them in your calculation.
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Zeratul
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| Posted: 29 Oct 2010 at 07:46 | IP Logged
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I do not see what is tricky about this question. It seems extremely straightforward for a diluted EPS question.
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missminimac
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| Posted: 29 Oct 2010 at 11:15 | IP Logged
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What threw me off is the problem states Preferred stock and Bonds do not
convert in current year.
Thanks for feedback.
Best!
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FAR: 10/28/10 (70)
BEC: 11/23/10
REG: 2011
AUD: 2011
Study Materials: RogerCPA and Wiley Questions
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Zeratul
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| Posted: 29 Oct 2010 at 12:11 | IP Logged
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Did the problem say they did not convert, or are not convertible this year?
If it says they did not convert, this information changes nothing. Diluted EPS is a "what-if" calculation.
If they're not convertible this year (because of some provision which delays their convertability), then they should not be included in the calculation.
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Topic: EPS - Trick Question
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