[Knight4CPA]

Hey all, quick question. Diluted EPS – If there are convertible preferred stock and you are looking to solve for diluted eps wouldnt you not subtract the PS dividend since it would be assumed its not paid since the PS was converted? The EPS Sim on ninja shows it being subtracted out of the numerator, but the Becker book (last years book could be old principle) says Note: the PS div’s are not subtracted from NI. we assume that since the PS was converted into CS, the PS divs were not paid. I doubt any Exam simulation will specify whether the PS Divs will pay our or not during a converted year.

Thoughts?

AUD: 70, 80✔ (Expires 1/18/2017 - / Ninja MCQ / CPAExcel MCQ)
REG: 61, 70, 75✔ (Expires 2017 - Ninja MCQ / CPAExcel MCQ)
BEC: 78✔(Expires 5/17/2017 - Ninja MCQ / Becker Flashcards / NinjaNotes)
FAR: 57 (just to get trigger time I scheduled 1 week after REG) Retake 5/13/16

[Excel14]

No, because you originally subtracted preferred dividends when calculating income available to common shareholders. If the preferred stock is assumed converted from the start, those dividends didn't happen, and thus must be added back, to get income available to common shareholders.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Knight4CPA]

So the EPS sim is incorrect on the Ninja software? being that it is still subtracting PS dividends for diluted convertible ?

AUD: 70, 80✔ (Expires 1/18/2017 - / Ninja MCQ / CPAExcel MCQ)
REG: 61, 70, 75✔ (Expires 2017 - Ninja MCQ / CPAExcel MCQ)
BEC: 78✔(Expires 5/17/2017 - Ninja MCQ / Becker Flashcards / NinjaNotes)
FAR: 57 (just to get trigger time I scheduled 1 week after REG) Retake 5/13/16

[Excel14]

I would have to actually see it, to have a better idea, but normally preferred dividends that originally were subtracted to get income available to common shareholders, has to be added back as if the preferred stock never existed. Conversion assumes the first of the year. Remember this too, if the stock doesn't prove to be dilutive, you would not add the additional shares to the denominator, so therefore you would subtract dividends for preferred stock from the numerator. So the big question you have to ask, is whether the preferred stock proved dilutive.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Knight4CPA]

you say add it back, i am not sure that is entirely correct, you just wouldnt do anything with it since it has been converted.

AUD: 70, 80✔ (Expires 1/18/2017 - / Ninja MCQ / CPAExcel MCQ)
REG: 61, 70, 75✔ (Expires 2017 - Ninja MCQ / CPAExcel MCQ)
BEC: 78✔(Expires 5/17/2017 - Ninja MCQ / Becker Flashcards / NinjaNotes)
FAR: 57 (just to get trigger time I scheduled 1 week after REG) Retake 5/13/16

[Knight4CPA]

you say add it back, i am not sure that is entirely correct, you just wouldnt do anything with it since it has been converted.

AUD: 70, 80✔ (Expires 1/18/2017 - / Ninja MCQ / CPAExcel MCQ)
REG: 61, 70, 75✔ (Expires 2017 - Ninja MCQ / CPAExcel MCQ)
BEC: 78✔(Expires 5/17/2017 - Ninja MCQ / Becker Flashcards / NinjaNotes)
FAR: 57 (just to get trigger time I scheduled 1 week after REG) Retake 5/13/16

[Excel14]

No, go to your materials and check it. It specifically states that you add the dividends back to income available to common (if the preferred proves to be dilutive), because when you originally calculated BEPS, you had to remove preferred dividends. There must be more to it, that I'm not aware of. Again, it would be better if I could see it firsthand.

Straight from my Gleim book….” The BEPS numerator is adjusted to add back any dividends on convertible preferred stock and the after tax interest expense related to any convertible debt”.

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Knight4CPA]

Yea, just cross referenced 3 websites, everything pointing in your direction. I wonder if it used to be different or if Becker's book is wrong.

AUD: 70, 80✔ (Expires 1/18/2017 - / Ninja MCQ / CPAExcel MCQ)
REG: 61, 70, 75✔ (Expires 2017 - Ninja MCQ / CPAExcel MCQ)
BEC: 78✔(Expires 5/17/2017 - Ninja MCQ / Becker Flashcards / NinjaNotes)
FAR: 57 (just to get trigger time I scheduled 1 week after REG) Retake 5/13/16

[Excel14]

Not sure what the situation is with that particular SIM. Look it over very carefully, since sometimes I miss the littlest details when doing this stuff. It may take 3 times looking at the same thing, before catching what I didn't see originally. This info is overwhelming, for sure!

BEC (2/28/16) ----- 78
FAR (09/10/16)-----
AUD
REG

CIA, CGAP, CFE

[Trele6]

I agree with Excel14, Your original computation would have you deduct PS, so if you dilute you would add it back like it never happened.

First go at the CPA! Only using Becker
Reg / Nov 2015 - 87
Far / Apr 2016 - 79
Bec / May 2016 - 80
Aud / Aug 2016

[Author]

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