The Hall Corporation had 100,000 shares of common stock outstanding at the beginning of the year. Hall issued 30,000 shares of common stock on May 1. On July 1, the company issued a 10% stock dividend. On September 1, Hall issued 1,000, 10% bonds, each convertible into 21 shares of common stock. What is the weighted average number of shares to be used in computing basic and diluted EPS, assuming the convertible bonds are dilutive?

Question

Brisa Barker

Business

15 May, 08:22

The Hall Corporation had 100,000 shares of common stock outstanding at the beginning of the year. Hall issued 30,000 shares of common stock on May 1. On July 1, the company issued a 10% stock dividend. On September 1, Hall issued 1,000, 10% bonds, each convertible into 21 shares of common stock. What is the weighted average number of shares to be used in computing basic and diluted EPS, assuming the convertible bonds are dilutive?

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Jethro · Answer 1

weighted average of outstanding shares. 124,000

for diluted EPS: 145,000

Explanation:

beginning 100,000

+ 30,000 x 7/12 (May issued shares)

+ 13,000 x 6/12 (130,000 x 10% stock dividends)

100,000 + 17,500 + 6,500 = 124,000 shares for the weighted average of outstanding shares.

for the diluted earning per share:

each bond can convert to 21 shares, potentially increasing the amount of shares outstanding to:

1,000 x 21 = 21,000 new shares

so for diluted EPS we will use:

124,000 + 21,000 = 145,000