Question

Manufacturing 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. Vaughn also had stock options outstanding at the beginning and end of 2018 which allow the holders to purchase 299000 shares of common stock at $26 per share. The average market price of Stine's common stock was $35 during 2018.
(A) The number of shares to be used in computing diluted earnings per share for 2018 is _________.

Answer 1

Answer:

(A) The number of shares to be used in computing diluted earnings per share for 2018 is 1,576,886 shares

Explanation:

Diluted Earning per share is calculated dividing Eaning or the year excluding preferred dividend by weighted average number of shares.

Weighted Average Number of Diluted Shares = ( 1,000,000 x 6/12 ) + ( 2,000,000 x 6/12 ) + [ (35-26 / 35) x 299,000 ) ]

Weighted Average Number of Diluted Shares = 500,000 + 1,000,000 + 76,886

Weighted Average Number of Diluted Shares = 1,576,886 shares