Any help with the question in Becker homework?

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  • #200058
    jicheng
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    Becker Question –

    CPA – 01107

    Elizabeth Corporation acquired Allen Corporation at the end of Year 1. Under terms of the acquisition agreement, Elizabeth agreed to provide former Allen shareholders 1,000 additional shares of Elizabeth stock for each new retail outlet opened during Year 2. Two new outlets were opened during Year 2:

    – One on 5/1 Year 2

    – One on 9/1, Year 2

    What number of shares related to the openings of the new retail outlets should enter into the calculation of Elizabeth’s basic EPS as of 12/31 Year 2?

    a. 2,000

    b. 1,250

    c. 1,000

    d. 0

    The answer is 1000 using the weighted average method. However, I refer to the book on F7-30 that :

    If the necessary condition have been satisfied by the end of the period, those shares are included in the basic EPS as if of the beginning of the period in which the conditions are met. The answer should be 2000 then

    Any comments? Thank you in advance.

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