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Cullumber Inc. has 352,000 common shares outstanding throughout the year. On June 30, Cullumber issued 13,000...

Cullumber Inc. has 352,000 common shares outstanding throughout the year. On June 30, Cullumber issued 13,000 convertible preferred shares that are convertible into 2 common shares each.

Calculate the weighted average number of common shares to use in calculating the diluted EPS. Assume that the preferred shares are dilutive.

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Answer #1

Since 13,000 convertible preferred shares were issued on June 30, hence they were outstanding during the year for 6 months. Hence, weighted average number of common shares will be calculated as under :

Weighted average number of common shares = Common shares outstanding throughout the year + Common shares from convertible preferred shares outstanding for 6 months

= 352,000 + (13,000 x 2) x 6/12

= 352,000 + 13,000

= 365,000

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