Question

Olive Branch Inc. had 400,000 shares of common stock issued and outstanding at December 31, 2016. On July 1, 2017 an additional 200,000 shares were issued for cash. Olive Branch also had stock options outstanding at the beginning and end of 2017, which allow the holders to purchase 60,000 shares of common stock at $28 per share. The average market price of Olive Branch’s common stock was $35 during 2017. The number of shares to be used in computing diluted earnings per share for 2017 is:__________.

Answer 1

$512,000

Step-by-step explanation:

The computation of Number of Share included for computing diluted earning per share is shown below:-

For computing the Number of Share included for computing diluted earning per share we need to find out the issued shares and Stock option which is given below

Issued Shares = 200,000 × 6 ÷ 12 (From July to December)

= $100,000

Stock option = 60,000 - (60,000 × $28 ÷ $35)

= $12,000

So, Total stock outstanding = Shares at Beginning + Issued Shares + Stock option

= 400,000 + $100,000 + $12,000

= $512,000