Question

Brick Co. has 170,000 shares of common stock outstanding at January 1, 2015. On May 1, 2015, it issued 30,000 additional shares of common stock. Outstanding all year were 12,000 shares of convertible cumulative preferred stock. Each share of the convertible preferred stock, which was dilutive in 2015, is convertible into one share of Brick’s common stock. What is the number of shares that Brick should use to calculate 2015 diluted earnings per share

Answer 1

Answer:

The number of shares that Brick should use to calculate 2015 diluted earnings per share are 202,000 shares

Explanation:

The computation of the number of shares are shown below:

= January 1 shares + may 1 shares + convertible cumulative preferred stock

= 170,000 shares × 4 months ÷ 12 months + 200,000 shares × 8 months ÷ 12 months + 12,000 shares

= $56666.67 + $133,333.33 + $12,000

= $202,000 shares

The 4 months are calculated from January 1 to May 1, 2015

And, the 8 months are calculated from May 1 to December 31