Question

On January 1, 2017, Hage Corporation granted incentive stock options to purchase 25,000 of its common shares at $9 each. The options are exercisable after one year. The market price of common averaged $12 per share during the quarter ending on March 31, 2018. There was no change in the 205,000 shares of outstanding common stock during the quarter ended March 31, 2018. Net income for the quarter was $8,968. The number of shares to be used in computing diluted earnings per share for the quarter is

Answer 1

Answer:

$211,750

Explanation:

The computation of diluted earnings per share for the quarter is shown below:-

Particulars                                                    Shares

Proceeds from exercise of options a          $225,000

(25,000 × $9)

Used to repurchase of common stock b     $18,750

( $225,000 ÷ $12)

Number of shares if option is exercised c   $25,500

Less: Shares assume repurchased d           $18,750

Potential Diluted common shares (e = c-d)  $6,750

Add: Number of common f                             205,000

Number of shares diluted earning per share $211,750

(e + f)

Therefore the Number of shares diluted earning per share is $211,750