Question

Marigold Corp. had 1,000,000 shares of common stock issued and outstanding at December 31, 2017. On July 1, 2018 an additional 1,000,000 shares were issued for cash. Marigold also had stock options outstanding at the beginning and end of 2018 which allow the holders to purchase 292000 shares of common stock at $21 per share. The average market price of Marigold’s common stock was $28 during 2018. The number of shares to be used in computing diluted earnings per share for 2018 is

Answer 1

Answer:

1,573,000 shares

Explanation:

The computation of the shares computing diluted earnings per share for 2018 is shown below:

= 1,000,000 shares × 6 months ÷ 12 months + 2,000,000 shares × 6 months ÷ 12 months + [($28 - $21) ÷ 28 ] × 292,000 shares

= 500,000 shares + 1,000,000 shares + 73,000 shares

= 1,573,000 shares

The 2,000,000 shares is come from

= 1,000,000 shares + 1,000,000 shares

= 2,000,000 shares