D is corrent. To determine the number of shares used for the calculation of basic earnings per share (BEPS) and diluted earnings per share (DEPS), first determine the weighted-average shares outstanding.
| 1/1/Y2 |
Outstanding |
2,500,000 |
| 4/1/Y2 |
Issuance (500,000 OS × ¾ of year) |
375,000 |
| 7/1/Y2 |
Issuance (250,000 OS × ½ of year) |
125,000 |
| |
|
3,000,000 |
For DEPS the bonds would be considered converted. Since there were 5,000 bonds, each convertible into 40 shares of stock, this results in an additional 50,000 equivalent shares (5,000 × 40 × 3/12 yr.). Thus, there would be 3,000,000 shares outstanding for BEPS and 3,050,000 shares outstanding for DEPS.
A is incorrect. To determine the number of shares used for the calculation of basic earnings per share (BEPS) and diluted earnings per share (DEPS), first determine the weighted-average shares outstanding.
| 1/1/Y2 |
Outstanding |
2,500,000 |
| 4/1/Y2 |
Issuance (500,000 OS × ¾ of year) |
375,000 |
| 7/1/Y2 |
Issuance (250,000 OS × ½ of year) |
125,000 |
| |
|
3,000,000 |
For DEPS the bonds would be considered converted. Since there were 5,000 bonds, each convertible into 40 shares of stock, this results in an additional 50,000 equivalent shares (5,000 × 40 × 3/12 yr.). Thus, there would be 3,000,000 shares outstanding for BEPS and 3,050,000 shares outstanding for DEPS.
B is incorrect. To determine the number of shares used for the calculation of basic earnings per share (BEPS) and diluted earnings per share (DEPS), first determine the weighted-average shares outstanding.
| 1/1/Y2 |
Outstanding |
2,500,000 |
| 4/1/Y2 |
Issuance (500,000 OS × ¾ of year) |
375,000 |
| 7/1/Y2 |
Issuance (250,000 OS × ½ of year) |
125,000 |
| |
|
3,000,000 |
For DEPS the bonds would be considered converted. Since there were 5,000 bonds, each convertible into 40 shares of stock, this results in an additional 50,000 equivalent shares (5,000 × 40 × 3/12 yr.). Thus, there would be 3,000,000 shares outstanding for BEPS and 3,050,000 shares outstanding for DEPS.
C is incorrect. To determine the number of shares used for the calculation of basic earnings per share (BEPS) and diluted earnings per share (DEPS), first determine the weighted-average shares outstanding.
| 1/1/Y2 |
Outstanding |
2,500,000 |
| 4/1/Y2 |
Issuance (500,000 OS × ¾ of year) |
375,000 |
| 7/1/Y2 |
Issuance (250,000 OS × ½ of year) |
125,000 |
| |
|
3,000,000 |
For DEPS the bonds would be considered converted. Since there were 5,000 bonds, each convertible into 40 shares of stock, this results in an additional 50,000 equivalent shares (5,000 × 40 × 3/12 yr.). Thus, there would be 3,000,000 shares outstanding for BEPS and 3,050,000 shares outstanding for DEPS.
