EPS with contigent issuance agreement Winsor INC. recently purchased holiday corp.

(EPS with contigent issuance agreement) Winsor Inc. recently purchased holiday corp., a large Midwestern home painting corporation. One of the terms of the merger was that if Holiday’s income for 2007 was $110,000 or more, 10,000 additional shares would be issued to Holiday’s stockholders in 2008. Holiday’s income for 2006 was $120,000. Hint: (LO7)

Instructions

  1. Would the contigent shares have to be considered in Winsor’s 2006 earnings per share computations?
  2. Assume the same facts, except that the 10,000 shares are contigent on Holiday’s achieving a net income of $130,000 in 2007. Would the contigent shares have to be considered in Winsor’s earning per share computations for 2006?
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Description

EPS with contigent issuance agreement Winsor INC. recently purchased holiday corp.

EPS with contigent issuance agreement Winsor INC. recently purchased holiday corp.

ANSWER


(EPS with contigent issuance agreement) Winsor Inc. recently purchased holiday corp., a large Midwestern home painting corporation. One of the terms of the merger was that if Holiday’s income for 2007 was $110,000 or more, 10,000 additional shares would be issued to Holiday’s stockholders in 2008. Holiday’s income for 2006 was $120,000. Hint: (LO7)

Instructions

  1. Would the contigent shares have to be considered in Winsor’s 2006 earnings per share computations?
  2. Assume the same facts, except that the 10,000 shares are contigent on Holiday’s achieving a net income of $130,000 in 2007. Would the contigent shares have to be considered in Winsor’s earning per share computations for 2006?