(EPS with Contingent 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.

a.
Would the contingent shares have to be considered in Winsor’s 2006 earnings per share computations?

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