A subsidiary has dilutive securities outstanding that include convertible bonds payable.The bonds are convertible into the parent's common stock.When calculating consolidated diluted earnings per share,the convertible bonds will affect

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The convertible bonds affect both the numerator and the denominator of the consolidated diluted earnings per share. The numerator is affected because the interest expense on the bonds is deducted from the consolidated net income to arrive at consolidated earnings available to common shareholders. The denominator is affected because the convertible bonds, when converted, increase the number of shares outstanding. Therefore, both the numerator and the denominator of the consolidated diluted EPS are impacted by the convertible bonds payable.

A Subsidiary Has Dilutive Securities Outstanding That Include Convertible Bonds