Vaughn Manufacturing had 829000 shares of common stock issued and outstanding at December 31, 2017. On...
Vaughn Manufacturing had 829000 shares of common stock issued and outstanding at December 31, 2017. On July 1, 2018, an additional 41600 shares of common stock were issued for cash. Vaughn also had unexercised stock options to purchase 32300 shares of common stock at $20 per share outstanding at the beginning and end of 2018. The average market price of Vaughn's common stock was $25 during 2018. What is the number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2018?
Homework Answers
Amount paid = 32,300 options *$20 exercise price = $646,000
Value in current shares = $646,000/$25 (i.e. average market price) = 25840 shares
Diluted shares = 32300 - 25840 = 6,460 shares.
Diluted EPS = Total Income - Preference dividend
(829000+ 6460 ) shares
Hence, 835,460 number of shares that should be used in computing diluted earnings per share for the year ended December 31, 2018.
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