Question

Warrants exercisable at $20 each to obtain 94000 shares of common stock were outstanding during a period when the average market price of the common stock was $25. Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted average number of outstanding shares by:__________

a. 18800.
b. 75200.
c. 94000.
d. 23500.

Answer 1

Answer: 18800

Step-by-step explanation:

First and foremost, we have to calculate the outstanding common shares which will be:

= Number of shares / Market price × Warrants Exercisable

= (94000 / 25) × 20

= 75200 shares

Then, the increase in the weighted average number of outstanding shares will be:

= 94000 - 75200

= 18800