Question

Warrants exercisable at $20 each to obtain 79000 shares of common stock were outstanding during a period when the average market price of the common stock was $25. Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted average number of outstanding shares by

Answer 1

$15,800

Step-by-step explanation:

Calculation to compute diluted earnings per share

Using this formula

Diluted earnings per share=Shares of common stock- (Shares of common stock×Warrants exercisable ÷Average market price of the common stock )

Let plug in the formula

Diluted earnings per share=79,000-(79,000×$20÷$25)

Diluted earnings per share=79,000-$63,200

Diluted earnings per share=$15,800

Therefore $15,800 diluted earnings per share will increase the weighted average number of outstanding shares.