Question

On January 1, 2016, Hage Corporation granted incentive stock options to purchase 21,500 of its common shares at $10 each. The options are exercisable after one year. The market price of common averaged $11 per share during the quarter ending on March 31, 2016. There was no change in the 150,000 shares of outstanding common stock during the quarter ended March 31, 2016. Net income for the quarter was $8,618. The number of shares to be used in computing diluted earnings per share for the quarter is (Round your final answer to whole number.): -
a. 171,500.
b. 150,000.
c. 151,955.
d. 169,545.

Answer 1

Answer:

c. 151,955

Explanation:

Calculation to determine what The number of shares to be used in computing diluted earnings per share for the quarter is

First step is to calculate the amount assumed to be exercised

Exercised amount= 21,500*$10 / $11 avg

Exercised amount=$l215,000/11 avg

Exercised amount= 19,545

Second step is to calculate the Net

Net=21,500-19,545

Net= 1,955

Now let calculate The number of shares to be used in computing diluted earnings per share

Using this formula

Number of shares=Outstanding+Net

Let plug in the formula

Number of shares=150,000 +1,955

Number of shares= 151,955

*diluted eps=$8,618 /151,955

Therefore The number of shares to be used in computing diluted earnings per share for the quarter is: 151,955