Salle Services issued $300 million of 6% bonds in 2011. The bonds are convertible into 60 million shares of its no par common stock. Salle elected the option to report the bonds at fair value, with changes in fair value reported in earnings. As a result the bonds are reported at $312 million in the December 31, 2013, balance sheet.
Required:
When calculating diluted EPS at December 31, 2013, what will be the net increase in the denominator of the EPS fraction? Explain.

Question

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The Answer of Salle Services issued $300 million of 6% bonds in 2011. The bonds are convertible into 60 million shares of its no par common stock. Salle elected the option to report the bonds at fair value, with changes in fair value reported in earnings. As a result the bonds are reported at $312 million in the December 31, 2013, balance sheet.
Required:
When calculating diluted EPS at December 31, 2013, what will be the net increase in the denominator of the EPS fraction? Explain.

Salle Services Issued $300 Million of 6% Bonds in 2011