Effect of Dilutive Securities on Earnings Per Share Calculations

question 72

Essay

Effect of dilutive securities on earnings per share calculations
A publicly accountable enterprise is planning on issuing the following two securities in the coming year
1. Convertible debt where mandatory conversion will take place five years after issue.
2. Debt with detachable warrants. The warrants can be exercised if profits exceed $ 1,000,000 in the next five years.
Instructions
Discuss how these two securities will affect the diluted earnings per share calculation.

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Definitions:

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