Question

January 1, 2021, Woody Forrest Corporation granted executive stock options to purchase 27,000 of its common shares at $7 each. The market price of common stock was $10 per share on December 31, 2021, and averaged $9 per share during the year then ended. There was no change in the 150,000 shares of outstanding common stock during the year. Net income for the year was $25,000. The number of shares to be used in computing diluted earnings per share for the quarter is:

Answer 1

Answer:

$156,000

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 Net effect

Net effect=$27,000*$7/ $9 = $21,000

Net effect=$27,000k - $21,000

Net effect=$6,000

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

Numbers of shares =150,000 + 6,000

Numbers of shares= 156,000

Diluted EPS= 25,000/ 156,000