Earnings Per Share: Diluted - Lesson 3
12 هزار بار بازدید -
9 سال پیش
-
In the video 16.02 -
In the video 16.02 - Earning Per Share: Diluted - Lesson 3 - Roger Philipp, CPA, CGMA, gives two examples of the diluted earnings per share (EPS) calculation. Each time he starts with the basic EPS calculation and then builds upon it with adjustments. The first example Roger gives illustrates the effects of cumulative preferred convertible stock on both basic EPS and diluted EPS.
The calculation of diluted EPS assumes that any potentially dilutive security is converted to common shares. So, when calculating diluted EPS dividends that would have been paid on convertible preferred stock are added back, not net of tax, to net income in the numerator, with the common shares resulting from their assumed conversion added to weighted average shares outstanding in the denominator, keep in mind the idea of cumulative preferred convertible stocks.
The second example illustrates diluted EPS effects of convertible bonds, which includes adding back to net income in the numerator, net of tax, bond interest expense that would have been paid on the convertible bonds.
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Video Transcript Sneak Peek:
So, let us look in your notes, it says... About page four it says, "For example, assume that a company reporting $930 in net income for the year has the following capital structure which did not change during the year. Preferred is $100 per 8 percent cumulative, four shares each convertible into 10 shares of common stock."
Common stock dollar per 100 shares.
To calculate basic EPS what do we do? You take your net income at 932 and then what happens is we're going to owe the preferred first. Preferred is going to be $100 at 8 percent is eight bucks. Four shares is 32 bucks. As we come up here, what's our formula? What's our calculation going to be?
The calculation of diluted EPS assumes that any potentially dilutive security is converted to common shares. So, when calculating diluted EPS dividends that would have been paid on convertible preferred stock are added back, not net of tax, to net income in the numerator, with the common shares resulting from their assumed conversion added to weighted average shares outstanding in the denominator, keep in mind the idea of cumulative preferred convertible stocks.
The second example illustrates diluted EPS effects of convertible bonds, which includes adding back to net income in the numerator, net of tax, bond interest expense that would have been paid on the convertible bonds.
Connect with us:
Website: https://accounting.uworld.com/cpa-rev...
Blog: https://accounting.uworld.com/blog/cp...
Twitter: Twitter: UWorldRogerCPA
Facebook: Facebook: UWorldRogerCPAReview
Instagram: Instagram: uworldrogercpareview
Pinterest: Pinterest: uworldrogercpareview
LinkedIn: LinkedIn: uworld-roger-cpa-review
Are you accounting faculty looking for FREE CPA Exam resources in the classroom? Visit our Professor Resource Center: https://accounting.uworld.com/cpa-rev...
Video Transcript Sneak Peek:
So, let us look in your notes, it says... About page four it says, "For example, assume that a company reporting $930 in net income for the year has the following capital structure which did not change during the year. Preferred is $100 per 8 percent cumulative, four shares each convertible into 10 shares of common stock."
Common stock dollar per 100 shares.
To calculate basic EPS what do we do? You take your net income at 932 and then what happens is we're going to owe the preferred first. Preferred is going to be $100 at 8 percent is eight bucks. Four shares is 32 bucks. As we come up here, what's our formula? What's our calculation going to be?
9 سال پیش
در تاریخ 1394/04/11 منتشر شده
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