In the January, 1977, issue of "The Accounting Review," detailed flow charts to assist in the computation of earnings per share (EPS) was presented. Intent was to provide an organized and understandable approach for teaching a complicated topic to students who often become hopelessly confused by the many details and computations required. The purpose of the present note is to point out that an important potential complication concerning the modified treasury stock method of handling options and warrants has been ignored, and its omission may lead to erroneous EPS calculations. The complication involves the use of the 20 percent test, and which options and warrants should be considered in making this test. The first test specifies that all options and warrants are to be combined and the total tested to see if the shares that could be issued through exercise exceed 20 percent of the shares outstanding. When the shares that would be issued through the exercise of all options and warrants do not exceed 20 percent of the outstanding shares, the regular treasury stock method is applicable, and each series of warrants and options would be considered individually for its dilutive effect.

Reviews the book "Cost Determination: A Conceptual Approach," by Joel S. Demski and Gerald A. Feltham.

Reviews the book "Social Auditing," by David H. Blake , William C. Frederick, Mildred S. Myers, Rogene A. Bucholz and Donald E. Wygal.

Reviews the book "Independence of Auditors: Current Practices in Canada, the United Kingdom and the United States."

Enough of this "glory," as Humpty Dumpty might call it. Eckel has served for years on the Canadian analogue to the APB. This makes it all the more gratifying that, despite our differences, we agree the main points: Financial accounting's allocation theory is a wretched mess, and things won't improve until we accountants radically revise our notion of income. A reading of [Kuhn, 1970, pp. 12-22, 47-48, 84, 162-65, 178-79] suggests that such a mess is just what one should expect of a pre-paradigmic19 discipline like financial accounting. If enough accountants of Eckel's professional eminence come to share his recognition of our intellectual crisis, our discipline may someday begin to prosper in the way the physical sciences have. Let's hope that these accountants do, for, as [Thomas, 1974, pp. 156-57] pointed out, this mess is also an ethical one. Meanwhile, to paraphrase the movie ad of a few years back, we can only continue to pray for Pacioli's Baby.

Mutually satisfactory allocations are agreements among users of a common facility to share the facility's cost. Accountants may assist negotiation of these agreements by providing characterizations of allocation methods under consideration or by recommending allocation methods that possess properties desired by collaborators. This paper examines a class of mutually satisfactory allocations implied by a particular list of properties. Acceptance of the properties implies an allocation function that is an average of expansion path allocations. When the number of collaborators is large, computation of the allocation is difficult, but the computational burden is reduced greatly when the cost function takes one of several specific forms. Moreover, the resultant simplifications of the allocation function take the form of familiar allocation rules.

A distinction in accounting which is often difficult for students to grasp concerns the difference in purpose between adjustments for general and specific price-level changes. This article describes how indifference curve analysis can be used to explain to students why adjustment to market value reflects unrealized gains and losses resulting from changes in the price of business assets relative to other goods, whereas general price-level adjustments eliminate gains and losses caused by the changing value of all goods vis a vis money, as well as to reflect gains and losses on monetary items.

Methodologically this paper represents a synthesis and a critique of various probabilistic approaches to "return on investment" (ROI) and "residual income" (RI). Starting with assumed normality of basic underlying variables, the paper proceeds to consider more complex circumstances revolving simulation and alternatives thereto. RI is judged more versatile than ROI. Assuming normality of basic underlying variables, RI always can be assumed normal, whereas ROI cannot. This facilitates determining probability intervals through analytically derived means and variances. In more complex cases, frequency distributions available with simulation contain data for constructing probability intervals. Where simulation is not used, it is concluded that the real world applicability of Kolmogorov-Smirnov and Cramer-von Mises goodness-of-fit tests, and especially Tchebycheff-type inequalities, can be limited. Thus, high, medium and low estimates of ROI and RI are considered viable alternatives to estimating specific probability intervals.

Reviews the book "Audit Problem: Metalcraft, Incorporated," 6th ed., by Arthur W. Holmes and Dale L. Kiefer.

The article focuses on a new design for the intermediate accounting course. One who sets out to review financial accounting textbooks will likely conclude that accounting educators are in virtually unanimous agreement on the manner, in which accounting information should be organized, classified and sequenced for delivery to students. Not only do all major intermediate accounting texts adopt virtually identical plans of organization, but also that plan is the same as that used in most introductory texts. The plan, well known to accounting educators, is that after initial chapters devoted to general aspects of the balance sheet and income statement, the text proceeds to have chapters on each of the major balance sheet and income statement accounts, that is, the chapter titles read like the financial statements themselves: cash, accounts receivable, inventories, fixed assets, current liabilities and so on. The similarity of organization in introductory and intermediate texts gives students the impression that intermediate accounting is just principles a little deeper.