medium · Financial Accounting liabilities-bonds-payable
Which of the following describes the 'if-converted' method used to calculate the impact of convertible bonds on Diluted Earnings Per Share (EPS)?
- Add back the gross interest expense to the numerator and subtract the shares from the denominator.
- Add back the after-tax interest expense to the numerator and add the potential shares to the denominator.
- Use the cash proceeds from the exercise to 'repurchase' shares at the average market price.
- Only include the shares in the denominator if the conversion price is higher than the average market price.
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