Question

Coronado Industries has 4760000 shares of common stock outstanding on December 31, 2020. An additional 198000 shares are issued on April 1, 2021, and 477000 more on September 1. On October 1, Coronado issued $6050000 of 8% 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

BEPS Shares = 5,067,500

DEPS Shares = 5,309,500

Step-by-step explanation:

Basic Earnings per Share (BEPS) = Earnings Attributable to Holders of Common Stock / Weighted Average Number of Common Shares.

Weighted Average Number of Common Shares

Outstanding Common Shares 4,760,000

Additional Shares: April( 9/12 × 198000) 148,500

Additional Shares: April( 4/12 × 477000) 159,000

Total Weighted Average Number of Common Shares 5,067,500

Diluted Earnings per Share (DEPS) =Adjusted Earnings Attributable to Holders of Common Stock /Adjusted Weighted Average Number of Common Shares.

Adjusted Weighted Average Number of Common Shares

Basic Earnings per Share Common Shares 5,067,500

Convertible Bonds ($6,050,000/$1,000 × 40) 242,000

Total Weighted Average Number of Common Shares 5,309,500