Carter Corp. had the following information related to common and preferred shares during the year:

Common shares outstanding, 1/1 700,000
Common shares repurchased, 3/31 20,000
Conversion of preferred shares, 6/30 40,000
Common shares repurchased, 12/1 36,000
Carter Corp. reported net income of $2,000,000 at December 31.

What amount of shares should Carter Corp. use as the denominator in the computation of basic earnings per share?

702,000 shares

Explanation:

The calculation of amount of shares is given below:-

Common shares outstanding = 700,000 × 12 ÷ 12

= 700,000

Repurchased = 20,000 × 9 ÷ 12

= 15,000

Conversion common shares = 40,000 × 6 ÷ 12

= 20,000

Repurchased = 36,000 × 1 ÷ 12

= 3,000

Amount of shares = Common shares outstanding - Repurchased + Conversion common shares - Repurchased

= 700,000 - 15,000 + 20,000 - 3,000

= 702,000 shares

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