To calculate diluted EPS, the accountant does all of the following except: adds back to net income any compensation expense recognized on the employee stock options adds back any interest expense (net of taxes) on convertible bonds adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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To calculate diluted EPS, the accountant does all of the following except:

adds back to net income any compensation expense recognized on the employee stock
options

adds back any interest expense (net of taxes) on convertible bonds
adds back any dividends on convertible preferred stock the firm subtracted in computing
net income to common shareholders.

enters only the net incremental shares issued (shares issued under options minus assumed
shares repurchased) in the computation of diluted EPS.

**Problem 2**

To calculate diluted EPS, the accountant does all of the following **except**:

a. adds back to net income any compensation expense recognized on the employee stock options  
b. adds back any interest expense (net of taxes) on convertible bonds  
c. adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders.  
d. enters only the net incremental shares issued (shares issued under options minus assumed shares repurchased) in the computation of diluted EPS.
Transcribed Image Text:**Problem 2** To calculate diluted EPS, the accountant does all of the following **except**: a. adds back to net income any compensation expense recognized on the employee stock options b. adds back any interest expense (net of taxes) on convertible bonds c. adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders. d. enters only the net incremental shares issued (shares issued under options minus assumed shares repurchased) in the computation of diluted EPS.
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