The Allen Corporation had 100,000 shares of common stock outstanding at the beginning of the year. Allen issued 30,000 shares of common May 1. On July 1, the company issued a 10% stock dividend. On September 1, Allen issued 1,000, 10% bonds convertible into 21 shares of stock each. What is the weighted average number of shares to be used in computing basic and diluted earnings per share (EPS), assuming the convertible bonds are dilutive? Basic Shares Diluted Shares A)130,000 132,000 B) 132,000 146,000 C) 132,000 139,000 D) 139,000 146,000
The answer is C. Basic = 1.1*(4*100,000+8*130,000)/12=132,000 Diluted component = 21*1,000*4/12=7,000 Diluted Shares = 132,000+7,000= 139,00
Thanks maratikus. I had earlier failed to grasp the effect of 10% stock dividend. You made it clear, I need to retrospectively multiply the shares by 110%.