Explanation Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS). Calculate the diluted earnings per share. Diluted earnings per share = Net earnings (2) Weighted number of shares outstanding (4) = $ 83 , 210 20 , 000 = $ 4.16 Working note (1): Calculate the number of shares outstanding on common stock: Number of shares outstanding = [ ( Number of shares of common stock outstanding ) × Time period ] + [ ( Number of shares of common stock outstanding +Issue of additional shares ) × Time period ] = [ 15 , 000 × 4 ( January to April) 12 ] + [ ( 15 , 000 + 4 , 500 ) × 8 ( May to December) 12 ] = 5 , 000 + 13 , 000

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Chapter 16, Problem 26E

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EBK INTERMEDIATE ACCOUNTING: REPORTING

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Solution Summary: The author calculates the diluted earnings per share by calculating the number of shares outstanding on common stock.

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