Ask Question
9 January, 14:51

Baldwin Company had 40,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued

20,000 shares of common stock. The company had outstanding fully vested incentive stock options for 10,000 shares

exercisable at $10 that had not been exercised by its executives. The average market price of common stock for the year was

$12. What number of shares of stock (rounded) should be used in computing diluted earnings per share?

A. 65,000.

B. 56,667.

C. 55,000.

D. 46,667.

+1
Answers (1)
  1. 9 January, 16:23
    0
    B. 56,667.

    Explanation:

    For computing, the number of shares, the following computations are required which are shown below

    1. Number of shares for January 1 would be

    = 40,000 shares * 12 months : 12 months

    = 40,000 shares

    2. Number of shares for April 1 would be

    = 20,000 shares * 9 months : 12 months

    = 15,000 shares

    Now the fully vested stock options would be 10,000 shares for $10 and its average market price would be $12 so the required proceed shares would be

    = (10,000 shares * $10) : ($12)

    = 8,333 shares

    Now the incremental shares would be

    = 10,000 shares - 8,333 shares

    = 1,667 shares

    SO, the number of shares would be

    = 40,000 shares + 15,000 shares + 1,667 shares

    = 56,667 shares
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Baldwin Company had 40,000 shares of common stock outstanding on January 1, 2016. On April 1, 2016, the company issued 20,000 shares of ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers