Question

Warrants exercisable at $15 each to obtain 81000 shares of common stock were outstanding during a period when the average market price of the common stock was $20. 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. 20250.
b. 81000.
c. 27000.
d. 60750.

Answer 1

a. 20250

Step-by-step explanation:

Calculation to determine diluted earnings per share will increase the weighted average number of outstanding shares

Diluted earnings per share=[$81,000- (81,000 × $15) ÷ $20 ]

Diluted earnings per share=[$81,000-($1,215,000÷$20)]

Diluted earnings per share=$81,000-$60,750

Diluted earnings per share=$20,250.

Therefore in computing diluted earnings per share will increase the weighted average number of outstanding shares by:$20,250