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21 July, 12:32

The following information has been obtained from the Mastic Corporation: 550,000 shares of common stock were outstanding on January 1, 2018. Bonds convertible into 50,000 shares of common stock were issued on July 1, 2018; the bonds have been determined to be dilutive. 36,000 shares of common stock were issued on November 1, 2018. 24,000 shares of common stock were purchased on December 1, 2018. What is the weighted average number of shares to be used in the calculation of diluted earnings per share for 2018

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  1. 21 July, 14:12
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    579,000 shares

    Explanation:

    The computation of the weighted average number of shares is given below:-

    Outstanding common stock = 550,000 shares

    Conversion of bonds from January to June

    = (50,000 x 6 months : 12 months)

    = 25,000 shares

    Shares of common stock from November to December

    = (36,000 x 2 months : 12 months)

    = 6,000 shares

    Purchased common stock of December

    = (24,000 x 1 months : 12 months)

    = - 2,000 shares

    Weighted average number of shares

    = Outstanding common stock + Conversion of bonds + Shares of common stock - Purchased common stock

    = 550,000 shares + 25,000 shares + 6,000 shares - 2,000 shares

    = 579,000 shares
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