Does the$$ after$-$tax interest$$ add$-$back for convertible debt require the amount of the coupon interest paid for the period of the earnings per share$$ computation?

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Part $1$

A$.$

This would only be correct if the bonds are issued at a premium because the effective interest rate method of amortization must be used for this purpose. The effective interest expense is used in the$$ after$-$tax interest$$ add$-$back because this is the amount deducted in arriving at$$ accrual$-$basis net income.

B$.$

This would only be correct if the bonds are issued at par because the effective interest rate method of amortization must be used for this purpose. The effective interest expense is used in the$$ after$-$tax interest$$ add$-$back because this is the amount deducted in arriving at$$ accrual$-$basis net income.

C$.$

$$Yes$,$ this is$$ correct, whether the bonds are issued at a$$ discount, a premium or par because the effective interest rate method of amortization must be used for this purpose. The effective interest expense is used in the$$ after$-$tax interest$$ add$-$back because this is the amount deducted in arriving at$$ accrual$-$basis net income.

D$.$

This would only be correct if the bonds are issued at a discount because the effective interest rate method of amortization must be used for this purpose. The effective interest expense is used in the$$ after$-$tax interest$$ add$-$back because this is the amount deducted in arriving at$$ accrual$-$basis net income.