Stock Options Issued During the Year
Refer to Practice 18–5. Assume that the options were issued on September 1 instead of being outstanding throughout the year. Compute diluted earnings per share, assuming that (1) the average stock price for the year and for the September 1–December 31 period was $4 and (2) the average stock price for the year and for the September 1–December 31 period was $13.
Practice 18–5
Diluted EPS and Stock Options
The company had 100,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued stock options that allowed employees to purchase 40,000 shares of common stock. The option exercise price is $10 per share. The company has no other potentially dilutive securities. Net income for the year was $200,000. Compute diluted earnings per share, assuming that (1) the average stock price for the year was $16 and (2) the average stock price for the year was $7.