In General, When a Convertible Security Is Exchanged for Common

question 37

Multiple Choice

In general, when a convertible security is exchanged for common stock, the overall effect is which of the following?
I. Stock shares will decrease.
II. Earnings per share will decrease.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements I and II are correct.
• D) Nether statement I nor II is correct.

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Definitions:

Matching Principle

An accounting principle that recognizes expenses in the same period as the revenues they are related to are earned.