Question

Bramble Corp. had 1420000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1254000 shares were issued for cash. Bramble also had stock options outstanding at the beginning and end of 2021 which allow the holders to purchase 377000 shares of common stock at $20 per share. The average market price of Bramble's common stock was $25 during 2021. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2021

Answer 1

Answer:

2,297,000 shares outstanding at December 31, 2021

Explanation:

Because the market price of stock was $25, then the stock option holder will execute the option to buy 377,000 shares  at price of $20. Thus the company had to sell 377,000 shares.

The number of share outstanding at year end = number of share outstanding at year beginning + newly issued shares - sold shares

= 1,420,000 + 1254000 - 377,000

= 2,297,000