A company is required to report both basic and diluted earnings per share when the:
A)company's capital structure includes convertible preferred stock.
B)company has extraordinary gains and losses.
C)company has discontinued operations.
D)company reports both net income and comprehensive income.

Question

Quizplus · Accepted Answer

When a company's capital structure includes convertible preferred stock, it is necessary to report both basic and diluted earnings per share. This is because the preferred stock can be converted into common stock, potentially diluting the earnings per share calculation. The other options (B, C, and D) do not necessarily require reporting of both basic and diluted earnings per share.

A Company Is Required to Report Both Basic and Diluted