Throughout 2017, Moon Ltd.had 1,200,000 common shares outstanding.As well, the corporation paid $300,000 in preferred dividends and reported net income of $5,100,000 for 2017.In connection with the acquisition of a subsidiary company in June 2016, Moon is required to issue 50,000 additional common shares on July 1, 2018, to the former owners of the subsidiary.Moon's diluted earnings per share for 2017 should be

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To calculate diluted EPS, we consider the potential shares that could be issued. The net income available to common shareholders is $5,100,000 - $300,000 = $4,800,000. The weighted average shares are 1,200,000 + 50,000 = 1,250,000. Diluted EPS = $4,800,000 / 1,250,000 = $3.84.