Question

Crane Company has 4830000 shares of common stock outstanding on December 31, 2020. An additional 195000 shares are issued on April 1, 2021, and 471000 more on September 1. On October 1, Crane issued $5910000 of 10% convertible bonds. Each $1,000 bond is convertible into 40 shares of common stock. No bonds have been converted. The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2021 is

Answer 1

Number of shares for basic earnings per share = 5,133,250 shares

Number of shares for diluted earning per share = 5,192,350 shares

Step-by-step explanation:

The computation is shown below:

For Number of shares to be used in computation of the earning per share is shown below:

= 4,830,000 shares × 12 months ÷ 12 months + 195,000 shares × 9 months ÷ 12 months + 471,000 shares × 4 months ÷ 12 months

= 4,830,000 shares + 146,250 shares + 157,000 shares

= 5,133,250 shares

For Number of shares to be used in computation of the diluted per share is shown below:

= 4,830,000 shares × 12 months ÷ 12 months + 195,000 shares × 9 months ÷ 12 months + 471,000 shares × 4 months ÷ 12 months + $5,910,000 ÷ $1000 × $40 × 3 months ÷ 12 months

= 4,830,000 shares + 146,250 shares + 157,000 shares + 59,100 shares

= 5,192,350 shares