Azul Incorporated has 3,500,000 shares of common stock outstanding on December 31,2013.An additional 400,000 shares of common stock were issued April 1,2014,and 150,000 more on July 1,2014.On October 1,2014,Azul issued 5,000,$1,000 face value,7 percent convertible bonds.Each bond is convertible into 40 shares of common stock.No bonds were converted into common stock in 2014.What is the number of shares to be used in computing basic earnings per share and diluted earnings per share,respectively?

Question

Quizplus · Accepted Answer

The basic EPS is calculated using the weighted average shares: 3,500,000 + (400,000 * 9/12) + (150,000 * 6/12) = 3,875,000. For diluted EPS, potential shares from convertible bonds are added: 5,000 bonds * 40 shares = 200,000, so 3,875,000 + 200,000 = 4,075,000. However, the correct choice is based on the given options, which is 3,875,000 and 3,925,000.

Azul Incorporated Has 3,500,000 Shares of Common Stock Outstanding on December