Question

Taylor Entity (TE) granted executive share options in 2016 for the year 2017 that are exercisable...

Taylor Entity (TE) granted executive share options in 2016 for the year 2017 that are exercisable for a total of 45,000 shares at $50 per share. No options were exercised during the year. The current average market price is $75 per share. The total reported profit or loss by TE for 2017 is $1,000,000. The total weighted-average number of shares outstanding is 250,000 (excluding share options)

Calculate the basic EPS for TE in the year 2017, as required by IAS 33 (5 points)

b. Calculate the diluted EPS for TE in the year 2017, as required by IAS 33 (10 points)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

a). Basic EPS for TE in the year 2017 = $ 4

b). Diluted EPS for TE in the year 2017 = $ 3.77

Working Notes

1). Calculation of basic EPS :

Basic earnings per share = Total income ÷ No.of weighted average shares outstanding

= $ 1,000,000 ÷ 250,000 = $ 4

2) Calculation of diluted EPS :

  • Amount paid to exercise option = Options issued × Exercise price per option = 45,000 × 50 = $2,250,000
  • Value of options in current shares = Amt paid to exercise option ÷ market price = 2,250,000 ÷ 75 = 30,000
  • Diluted shares = Options issued - value of options in current shares = 45,000 - 30,000 = 15,000

Diluted earnings per share = Total Income ÷ (No.of weighted avg shares outstanding + Diluted shares)

= 1,000,000 ÷ (250,000 + 15,000) = $ 3.77

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2017, Bugaboo Corporation granted 40,000 options to key executives. Each option allows the...
On January 1, 2017, Bugaboo Corporation granted 40,000 options to key executives. Each option allows the executive to purchase one share of Bugaboo’s common shares at a price of $30 per share. The options were exercisable within a two-year period beginning January 1, 2019, if the grantee was still employed by the company at the time of the exercise. On the grant date, Bugaboo’s shares were trading at $25 per share, and a fair value options pricing model determined total...
On January 1, 2017, Bugaboo Corporation granted 40,000 options to key executives. Each option allows the...
On January 1, 2017, Bugaboo Corporation granted 40,000 options to key executives. Each option allows the executive to purchase one share of Bugaboo’s common shares at a price of $30 per share. The options were exercisable within a two-year period beginning January 1, 2019, if the grantee was still employed by the company at the time of the exercise. On the grant date, Bugaboo’s shares were trading at $25 per share, and a fair value options pricing model determined total...
Computing Diluted EPS: Stock Options Rand Inc. had net income of $1,760,000. During the year, 400,000...
Computing Diluted EPS: Stock Options Rand Inc. had net income of $1,760,000. During the year, 400,000 shares were outstanding on average and Rand's common stock sold at an average market price of $50 per share. In addition, Rand had 40,000 stock options outstanding to purchase a total of 40,000 common shares at $25 for each option exercised. Required a. Compute basic EPS. b. Compute diluted EPS.
On November 1, 2017, Sunland Company adopted a stock-option plan that granted options to key executives...
On November 1, 2017, Sunland Company adopted a stock-option plan that granted options to key executives to purchase 21,900 shares of the company’s $9 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $50, and the fair value option-pricing model determines the...
Exercise 16-10 On November 1, 2017, Pharoah Company adopted a stock-option plan that granted options to...
Exercise 16-10 On November 1, 2017, Pharoah Company adopted a stock-option plan that granted options to key executives to purchase 37,500 shares of the company’s $10 par value common stock. The options were granted on January 2, 2018, and were exercisable 2 years after the date of grant if the grantee was still an employee of the company. The options expired 6 years from date of grant. The option price was set at $40, and the fair value option-pricing model...
On January 1, 2021, a company granted stock options to employees for the purchase of 20,000...
On January 1, 2021, a company granted stock options to employees for the purchase of 20,000 shares. Each option allows the employees to purchase one share of the company's $4 par common stock at $33 per share. The options are exercisable during a six-year period beginning January 1, 2025 by grantees still employed by the company. The Black-Scholes option pricing model determines total compensation expense to be $199,000. The market price of common stock was $15 per share at the...
On January 1, 2016, Blossom Company issued 10-year, $ 104,000 face value, 6% bonds at par...
On January 1, 2016, Blossom Company issued 10-year, $ 104,000 face value, 6% bonds at par (interest payable annually on January 1). Each $ 1,100 bond is convertible into 32 shares of Blossom $2 par value common stock. The company has had 11,000 shares of common stock (and no preferred stock) outstanding throughout its life. None of the bonds have been converted as of the end of 2017. Blossom also has adopted a stock-option plan that granted options to key...
Under its executive stock option plan, National Corporation granted 29 million options on January 1, 2021,...
Under its executive stock option plan, National Corporation granted 29 million options on January 1, 2021, that permit executives to purchase 29 million of the company’s $1 par common shares within the next eight years, but not before December 31, 2025 (the vesting date). The exercise price is the market price of the shares on the date of grant, $33 per share. The fair value of the options, estimated by an appropriate option pricing model, is $5 per option. No...
As part of its executive compensation plan, Vertovec Inc. granted 30,000 of its no par common...
As part of its executive compensation plan, Vertovec Inc. granted 30,000 of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. Vertovec’s common shares have a market price of $5 per share on January 1, 2017, the grant date of the restricted stock award, as well as on December 31, 2018. 500,000 shares were outstanding at January 1, 2018. Net income for 2018 was $140,000. Required: Compute Vertovec’s basic and diluted earnings...
On January 1, 2021, a company granted stock options to employees for the purchase of 16,000...
On January 1, 2021, a company granted stock options to employees for the purchase of 16,000 shares. Each option allows the employees to purchase one share of the company's $10 par common stock at $29 per share. The options are exercisable during a six-year period beginning January 1, 2023 by grantees still employed by the company. The Black-Scholes option pricing model determines total compensation expense to be $450,000. The market price of common stock was $22 per share at the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT