Arthur, Inc., had 610,000 shares of common stock issued and outstanding on December 31, 2015. On...

Arthur, Inc., had 610,000 shares of common stock issued and outstanding on December 31, 2015. On July 1, 2016, an additional 40,000 shares of common stock were issued for cash. Arthur, Inc. also had unexercised stock options to purchase 32,000 shares of common stock at $15 per share outstanding at the beginning and end of 2016. The average market price of Arthur, Inc. common stock was $20 during 2016. How many shares that should be included in computing diluted earnings per share for 2016?

$630,000

$638,000

$658,000

$662,000

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Expert Solution



	Computation of How many shares that should be included in computing diluted earnings per share for 2016: -
	share considered in computation of diluted Earning per share	638000
	Calculations mentioned below
Date	Particulars	No shares held	Period of holding	Calculation	Diluted shares
1/1/2016	Total shares outstanding at the beginning of the year	610000	12 months	610000 /12 months X 12 months	610000
1/7/2016	40000 stock was purchased	40000	6 months	40000 /12 months X 6 months	20000
1/1/2016	32000 unexercised stock option to purchase @$15 each	32000	12 months	32000(32000 X $15/ $20) /12 months X 12 months	8000
	share considered in computation of diluted EPS			Total ( 610000+20000+8000)	638000

	Notes
1	Total 610000 shares out standing beginning and at the end of the period so we have to considered the total shares out standing divided by 12 months and multiplied with 12 months ,while calculating the diluted shares
2	In 1 st of July 2016 Arthur. Inc., purchased additional stock of 40000 but the stock held only six month in the current year so we have taken half of the stock for holding half of the period. 40000 share purchased and divided by 12 months and multiplied with 6 months ,while calculating the diluted shares because of holding period of shares only 6 months
3	and third one is 32000 stock option is available at the beginning and the end of the year the price of the option is $15 and the average price of the stock of Artur inc is $ 20 per share, so 32000 shares less 24000 shares based on (32000 X $15/$20) i.e 8000 shares arrived

ekkarill92 answered 1 year ago

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