Question

Sheridan Company, had 837000 shares of common stock issued and outstanding at December 31, 2017. On July 1, 2018, an additional 40600 shares of common stock were issued for cash. Sheridan also had unexercised stock options to purchase 31400 shares of common stock at $15 per share outstanding at the beginning and end of 2018. The average market price of Sheridan's common stock was $20 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

Answer 1

865,150 shares

Explanation:

The calculation of shares for diluted earning per share is shown below:-

Shares for diluted earning per share = Outstanding shares + Issued shares + Stock option

= 837,000 + (40,600 × 6 ÷ 12) + ((31,400 - (31,400 × $15 ÷ $20)

= 837,000 + 20,300 + 7,850

= 865,150 shares

Therefore we have applied the above formula.