Answer:
The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2019 is -
Basic Earnings Per Share = 2,155,000 shares AND
Diluted Earnings Per Share = 2,215,000 shares
Explanation:
Basic Earnings per Share = Earnings Attributable to holders of Common Stocks ÷ Weighted Average Number of Common Stocks Outstanding.
For <u>Basic Earnings per Share</u> calculations, Weighted Average Number of Common Stocks Outstanding will be,
Weighted Average Number of Common Stocks Outstanding :
Outstanding at beginning of the year 2,000,000
Issued April 1, 2019 : (100,000 × 9/12) 75,000
Issued September 1 : (240,000 × 4/12) 80,000
Weighted Average Number of Common Stocks Outstanding 2,155,000
For <u>Diluted Earnings per Share</u> calculations, entity takes into account potential voting right that arise from other financial instruments in issue as follows,
Weighted Average Number of Common Stocks Outstanding :
Outstanding at beginning of the year 2,000,000
Issued April 1, 2019 : (100,000 × 9/12) 75,000
Issued September 1 : (240,000 × 4/12) 80,000
Convertible Bonds : ($3,000,000/ $1,000 × 60) × 4/12 60,000
Weighted Average Number of Common Stocks Outstanding 2,215,000