Question

Brick Co. has 170,000 shares of common stock outstanding at January 1, year 8. On May 1, year 8, it issued 30,000 additional shares of common stock. Outstanding all year were 12,000 shares of convertible cumulative preferred stock. Each share of the convertible preferred stock, which was dilutive in year 8, is convertible into one share of Bricks common stock. What is the number of shares that Brick should use to calculate year 8 diluted earnings per share

Answer 1

202,000 shares

Step-by-step explanation:

170,000 common stocks outstanding, January 1

30,000 additional common stock issued, May 1 ⇒ 30,000 x 8/12 = 20,000

diluted shares = 12,000 (since each preferred stock is convertible to common stock, then all of them must be included as diluted stocks)

total number of shares = 170,000 +20,000 + 12,000 = 202,000 shares