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1......Warrants exercisable at $25 each to obtain 30,000 shares of common stock were outstanding during a period when the average market price of the common stock was $20. Application of the treasury stock method for the assumed exercise of these warrants in computing diluted earnings per share will increase the weighted average number of outstanding shares by:
Select one:
a. 30,000 b. 24,000 c. 6,000 d. 7,500 e. 0

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Tutorconsortium421

Application of treasury method is used for exercising the warrants.

Outstanding Common shares = Number of shares / Market price * Exercisable price

= 30,000 shares / $25 * $20

= 24,000 shares

After the warrants have been exercise, the increase in weighted average number of common shares is as follows:

Increase in weighted average number of shares = 30,000 shares - 24,000 shares

= 6,000 shares

Thus, the increase in weighted average number of common shares is by 6,000 shares.

How do you figure out diluted EPS when you have a warrant?

Net income less preferred dividends, divided by the total number of diluted shares outstanding, is the formula for calculating diluted earnings per share (EPS) (basic shares outstanding plus the exercise of in-the-money options, warrants, and other dilutive securities).

How is the weighted average share count determined?

The number of outstanding shares is multiplied by the proportion of the reporting period to which that number pertains for each period to arrive at the weighted average number of shares.

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