When Computing Diluted Earnings Per Share, a Company May Use

question 67

Essay

When computing diluted earnings per share, a company may use the if-converted method and the treasury stock method.
Required:
Describe when and why a company would use each method.

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Definitions:

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.

Accrued Liabilities

Financial obligations that a company has incurred during a period but has not yet paid for, appearing on the balance sheet.

Operating Leases

Leases where the lessor retains significant risks and rewards of ownership, typically for assets that are used for a short period of the asset's life.

Capital Leases

A lease classified as an asset on a company's balance sheet, indicating that the lessee has control over and assumes risk of ownership for the leased asset.