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how to calculate total number of shares used to compute diluted earnings per share (EPS)

Question

Stine Inc. had 500,000 shares of common stock issued and outstanding at December 31, 2014. On July 1, 2015 an additional 500,000 shares were issued for cash. Stine also had stock options outstanding at the beginning and end of 2015 which allow the holders to purchase 150,000 shares of common stock at $28 per share. The average market price of Stine’s common stock was $35 during 2015. The number of shares to be used in computing diluted earnings per share for 2015 is

a. 1,120,000

b. 1,030,000

c. 870,000

d. 780,000

 

 

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