Answer:
(a) Basic earnings per share = $2.70 per share
(b) Diluted earnings per share = $2.38 per share
Explanation:
(a) Calculate the basic earnings per share for Little, Inc. for 2013. Round to two decimal places.
Basic earnings per share = Earnings / Number of shares of common stock .......... (1)
Where;
Earnings = $162,000
Number of shares of common stock = 60,000
Substituting the values into equation (1), we have:
Basic earnings per share = $162,000 / 60,000 = $2.70 per share
(b) Calculate the diluted earnings per share for Little, Inc. for 2013. Round to two decimal places.
Diluted earnings per share = Earnings / (Number of shares of common stock + Number of common shares for employee stock options) ............ (2)
Where;
Earnings = $162,000
Number of shares of common stock = 60,000
Number of common shares for employee stock options = 8,000
Substituting the values into equation (2), we have:
Diluted earnings per share = $162,000 / (60,000 + 8,000) = $162,000 / 68,000 = $2.38 per share
