Which statement is correct?
A)When convertible securities are redeemed during the year,the income effect and share effect are pro-rated for the diluted EPS calculation.
B)When convertible securities are issued during the year,the income effect and share effect are not pro-rated for the diluted EPS calculation.
C)When convertible securities are issued at the beginning of the year,the income effect and share effect are pro-rated for the diluted EPS calculation.
D)When the right to convert convertible securities expires during the year,the income effect and share effect are not pro-rated for the diluted EPS calculation.

Question

Quizplus · Accepted Answer

When convertible securities are redeemed during the year, their income effect and share effect are pro-rated for the diluted EPS calculation. This means that the impact of the securities on earnings per share is adjusted based on the portion of the year they were outstanding. This is different from when convertible securities are issued during the year, where their impact is not pro-rated, and when the right to convert expires during the year, where the impact is also not pro-rated. When convertible securities are issued at the beginning of the year, they are pro-rated for the diluted EPS calculation for the entire year.

Which Statement Is Correct