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Homework answers / question archive / Baldwin Company had 40,000 ordinary shares outstanding on January 1, 2014
Baldwin Company had 40,000 ordinary shares outstanding on January 1, 2014. On April 1, 2014 the company issued 20,000 ordinary shares. The company had outstanding fully vested incentive share options for 10,000 shares exercisable at $10 that had not been exercised by its executives. The average market price of ordinary share for the year was $12. What number of shares (rounded) should be used in computing diluted earnings per share?
A) 65,000
B) 56,667
C) 55,000
D) 61,667.
Computation of the number of shares should be used in computing diluted earnings per share:-
Common shares = Existing shares + Additional issue
= 40,000 + (20,000 * 9 / 12)
= 40,000 + 15,000
= 55,000 shares
Dilutive shares = 10,000 - (10,000 * $10 / $12)
= 10,000 - 8,333.33
= 1,666.67 shares
Total shares = Common shares + Dilutive shares
= 55,000 + 1,666.67
= 56,666.67 shares Or 56,667 shares
Correct option is B) 56,667 shares
