Question

Bonita Industries had 809000 shares of common stock outstanding at December 31, 2021. In addition, it had 149000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of Bonita's stock at an option price of $37 per share. The average market price of Bonita's common stock for 2021 was $50. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2021? 861351 919260 847740 809000

Answer 1

847,740 shares

Step-by-step explanation:

diluted earnings per share formula:

= (net income - preferred dividends) / (weighted average + diluted shares)

diluted shares are convertible securities (e.g. bonds or preferred stock) that are converted into common stocks.

common stocks outstanding Dec. 31, 2021 = 809,000

diluted shares = [($50 - $37) / $50] x 149,000 = 38,740 diluted shares

the denominator of the diluted EPS formula = weighted average + diluted shares = 809,000 + 38,740 = 847,740 shares