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Stine Inc. had 1,000,000 shares of common stock issued and outstanding at December 31, 2020. On July 1, 2021 an additional 1,000,000 shares were issued for cash. Stine also had stock options outstanding at the beginning and end of 2021 which allow the holders to purchase 300,000 shares of common stock at $28 per share. The average market price of Stine's common stock was $35 during 2021. The number of shares to be used in computing diluted earnings per share for 2021 is

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The number of shares to be used in computing diluted earnings per share for 2021 is 1,560,000

Diluted earnings per share=(1,000,000* 6/12) + (2,000,000 *6/12) + [((35 – 28) ÷35) *300,000]

Diluted earnings per share=500,000+1,000,000+60,000

Diluted earnings per share= 1,560,000

Therefore The number of shares to be used in computing diluted earnings per share for 2021 is  1,560,000

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