Below is a table I made to summarize what happens to the numerator and denominator for EPS calculations for each kind of relevant transaction. I can see this being helpful for CPA exam preparation, as well as for students of Intermediate Accounting. I include information regarding:
- Net income
- Preferred stock dividends: cumulative and noncumulative, convertible and nonconvertible
- Common shares
- Treasury shares
- Share dividends
- Convertible preferred stock
- Incentive stock options
- Convertible bonds
- Whether the effect is dilutive or not (PCS = potential common shares)
I also included footnotes for elaboration on three of the more complex points.
This is a summary. It does not explain every calculation needed for EPS. It also does not explain how or when to calculate weighted averages for the shares in the denominator.
Here is a PDF of the sheet hosted on Box.
