When a Subsidiary Has Preferred Stock That Is Convertible into Subsidiary

question 46

Multiple Choice

When a subsidiary has preferred stock that is convertible into subsidiary common stock,the parent's equity in the subsidiary's diluted earnings is calculated by the number of

• A)subsidiary shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure.
• B)parent shares into which the subsidiary's dilutive securities can be converted times the parent's basic EPS figure.
• C)subsidiary common shares held by the parent times the subsidiary's diluted EPS figure.
• D)parent shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure.

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Definitions:

Liabilities

Financial obligations or debts that a company is required to pay in the future.

Revenues

The total income generated by a company from its business activities, typically from the sale of goods and services to customers.

Common Stock

A type of security representing ownership in a corporation, giving holders a share of profits in the form of dividends and voting rights in corporate matters.

Liability Accounts

Financial obligations or debts of a business that are recorded on its balance sheet.