Required InformationKnowledge Check 01Which of the following statements about contingently issuable shares are true? (Select all that apply.)Check All That ApplyContingently issuable shares are shares of common stock to be issued, contingent on the occurrence of some future circumstance.If contingently issuable shares will be issued at a future date if a certain level of income is achieved and that level of income or more wasalready reported this year, those additional shares are added to the numerator of the diluted EPS fraction.If contingently issuable shares will be issued at a future date if a certain level of income is achieved and that level of income or more wasalready reported this year, those additional shares are added to the denominator of the diluted EPS fraction.When calculating EPS, contingently issuable shares are always considered to be outstanding in the computation of diluted EPS.Prev17 of 18Next>IMG-1896.jpgIMG-1895.jpgIMG-1894.jpgndf.

Contingency represents the fulfilment of a task at a contingent event, which may or may not arise in future. The contingent share represents the share that has not been issued but it would be issued at the future date. It would be issued on the fulfilment of some circumstances. Diluted earnings per share is calculated by deducting preferred dividend from the net income and dividing it by the sum of weighted average number of shares and conversion, if any. If the contingent shares are issued, it would increase the number of shares, Therefore, it would be added in the weighted average number of shares at denominator. Therefore, the correct options are: a. Contingently issuable shares are shares of common stock to be issued, contingent on the occurrence of some future circumstance. c. If contingently issuable shares will be issued at a future date if a certain level of income is achieved and that level of income or more was already reported this year, those additional shares are added to the denominator of the diluted EPS fraction.