Nolte Co. has 4,800,000 shares of common stock outstanding on December 31, 2012. An additional 200,000 shares are issued on April 1, 2013, and 480,000 more on September 1. On October 1, Nolte issued $6,000,000 of 9% convertible bonds. Each $1,000 bond is convertible into 40 shares of common stock. No bonds have been converted. The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2013 is Group of answer choices 5,110,000 and 5,110,000. 5,110,000 and 5,170,000. 5,110,000 and 5,350,000. 5,880,000 and 5,320,000.

Question

Zaiden

Business

21 May, 08:40

Nolte Co. has 4,800,000 shares of common stock outstanding on December 31, 2012. An additional 200,000 shares are issued on April 1, 2013, and 480,000 more on September 1. On October 1, Nolte issued $6,000,000 of 9% convertible bonds. Each $1,000 bond is convertible into 40 shares of common stock. No bonds have been converted. The number of shares to be used in computing basic earnings per share and diluted earnings per share on December 31, 2013 is Group of answer choices 5,110,000 and 5,110,000. 5,110,000 and 5,170,000. 5,110,000 and 5,350,000. 5,880,000 and 5,320,000.

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Answers (1)

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Jayden Simon · Answer 1

5,110,000 and 5,170,000.

Explanation:

earnings per share EPS = (net income - preferred dividends) / weighted average of outstanding shares

4,800,000 at the beginning of the year 200,000 issued April 1 = 200,000 x 9/12 = 150,000 480,000 issued September 1 = 480,000 x 4/12 = 160,000

weighted average outstanding shares = 4,800,000 + 150,00 + 160,000 = 5,110,000

diluted shares = ($6,000,000 / $1,000) x 40 x 3/12 = 60,000

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

weighted average of outstanding shares + diluted shares = 5,110,000 + 60,000 = 5,170,000 shares