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7. Earnings per Share with Options Kearney Company’s net income for 2019 was $600,000. The tax...

7. Earnings per Share with Options

Kearney Company’s net income for 2019 was $600,000. The tax rate was 20%. The only potentially dilutive securities outstanding were 900 options issued during 2018. Each option can be exercised for one share of common stock at $20 per share. None has been exercised, and 100,000 shares of common stock were outstanding during 2019. In addition, 2,000 shares of 6% $100 par non-cumulative preferred stock were outstanding. Kearney’s Board of Directors declares total dividends of $15,000 in 2019. The average price of Kearney’s common stock during 2019 was $40.

Instructions:
(a) Compute basic earnings per share for 2019.
(b) Compute diluted earnings per share for 2019.

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The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

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