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Question 21

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Intermediate Accounting (Kieso)
Found in: Page 874

Short Answer

Explain how convertible securities are determined to be potentially dilutive common shares and how those convertible securities that are not considered to be potentially dilutive common shares enter into the determination of earnings per share data.

Convertible securities are viewed as possibly dilutive protections when their change would diminish profit per share.

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Step by Step Solution

Identification of convertible securities are determined to be potentially dilutive common shares

Convertible securities are viewed as possibly dilutive protections when their conversion would decline profit per share. On the off chance that the present circumstance doesn't result, change isn't assumed, and just fundamental EPS is accounted for.

Convertible securities other than potentially dilutive common shares enter into the determination of earnings per share data

On the off chance that the present circumstance doesn't result, transformation isn't accepted, and fundamental EPS is reported.

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