@Stoleway – I think you're right. DEPS is my issue – here is one for finding the weighted average in DEPS:
At December 31, Year 1, Lex, Inc., had 600,000 shares of common stock outstanding. On April 1, Year 2, an additional 180,000 shares of common stock were issued for cash. Lex also had $5 million of 8% convertible bonds outstanding at December 31, Year 2, which are convertible into 150,000 shares of common stock. The bonds were dilutive in the Year 2 DEPS computation. No bonds were issued or converted into common stock during Year 2. What is the number of shares that should be used in computing DEPS for Year 2?
Answer:
DEPS should be based on the weighted-average number of (1) shares of common stock outstanding and (2) the shares of common stock assumed to have been issued to reflect the conversion of the bonds. The weighted-average number of shares for Year 2 should therefore be 885,000, based on 750,000 shares outstanding for the entire year (600,000 beginning balance + 150,000 from the hypothetical conversion of bonds) and 180,000 additional shares issued on April 1.
I guess my issue with this is that I dont understand why the conversion of bonds would be added to the W/A porpotionment of the outstanding shares. I was under the impression that you W/A using the porportion treatment for the common shares and then add to it the converted bonds and preferred shares.
AUD: DONE
FAR: DONE
BEC: DONE
REG: DONE
IM GOING TO BE A CPA!!!!!
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