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    Treasury Stock Methods: Diluted Earnings Per Share

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    Simpson Corporation computed its diluted earnings per share for the year ended September 30. 20X2. The company had 200, 000 shares outstanding at the beginning of the year, issued 60,000 shares at April1 X2, and reacquired 2,000 shares to be held in its treasury on July 1, 20X2.

    The company also has 2,000 options outstanding exercisable at $40 per share. The average market price of Simpson's shares during the year was $50. The common stock equivalents added to the company's weighted average shares outstanding used for basic earnings per share was computed using the treasury stock methods.

    How many additional shares would Simpson include in its diluted earnings per share calculations?

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    Solution Summary

    This response determines the number of additional shares a corporation will include in its diluted earnings per share.