January 1, 2018, Parker Corporation granted options to purchase 12,000 of its common shares at $8 each. The market price of common stock was $10 per share on March 31, 2018, and averaged $12 per share during the quarter then ended. There was no change in the 60,000 shares of outstanding common stock during the quarter ended March 31, 2018. Net income for the quarter was $50,000. The number of shares to be used in computing diluted earnings per share for the quarter is
a) 60,000
b) 64,000
c) 68,000
d) 72,000
Value of options in current shares = Amount paid to exercise options/Current (Average) share price |
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Amount paid to exercise options (12,000*8) |
96,000 |
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Average share price in quarter |
12 |
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Value of options in current shares (96,000/12) (A) |
8,000 |
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Diluted shares = Options issued - Value of options in current shares |
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Options issued (B) |
12,000 |
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Diluted shares (12,000-8000) (C=B-A) |
4,000 |
|
Existing no of shares (D) |
60,000 |
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Total no of shares to be used for diluted earnings (E=C+D) |
64,000 |
|
Ans |
Options (B) 64,000 shares |
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