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Four years ago, Wade Corporation granted incentive stock options to purchase 28,000 of its common...

Question:

Four years ago, Wade Corporation granted incentive stock options to purchase 28,000 of its common shares at $7 each. The options are exercisable beginning this year. The market price of common shares averaged $10 per share during the year. There was no change in the 250,000 shares of outstanding common stock during the year. What is the number of shares to be used in computing diluted earnings per share for the year?

Weighted Average Common Stock Outstanding

Weighted Average Common Stock Outstanding is basically used in computing for the earnings per share and for the diluted earnings per share. To compute the Weighted Average Common Stock Outstanding , certain factors must be observed, most especially if there are potential shares that can be converted into ordinary shares.

Answer and Explanation:

The number of shares to be used in computing diluted earnings per share for the year is 258,400 shares

Common Shares Outstanding 250,000
Share assumed from the exercise of the options 28,000
Share assumed from the reacquisition of the options (28,000 * 7) / 10 -19,600
The number of shares to be used in computing diluted earnings per share for the year 258,400

Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
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