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Grimm Company has 1,800,000 ordinary shares outstanding on December 31, 2018. An additional 150,000 ordinary shares...

Grimm Company has 1,800,000 ordinary shares outstanding on December 31, 2018. An additional 150,000 ordinary shares were issued on July 1, 2019, and 300,000 more on October 1, 2019. On January 1, 2019, Grimm issued 6,000, €1,000 face value, 8% convertible bonds. Each bond is convertible into 40 ordinary shares. The bonds are dilutive. No bonds were converted in 2019. What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively, for the year ended December 31, 2019?

a. 1,950,000 and 2,130,000

b. 1,950,000 and 1,950,000

c. 1,950,000 and 2,190,000

d. 2,250,000 and 2,430,000

e. none of the above

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Answer #1

1.Calculation of No.of shares to be used in computing basic earning per shares

Date No.of shares (a) Months (b)Weight (a/12 months) Weighted shares
01/Jan/19 1800000 12 1.00 1800000
01/Jul/19 150000 6 0.50 75000
01/Oct/19 300000 3 0.25 75000
Total 1950000

2. Calculation of No.of shares to be used in computing diluted earnings per share

= No.of shares used for basic earning per share+ No.of future convertible shares

= 1950000+(6000*40 share)

=2190000 shares

So, The correct option is C, remaining options are not appropriate

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