On January 1, 2013, Hanley Corporation granted incentive stock options to purcha

Question

On January 1, 2013, Hanley Corporation granted incentive stock options to purchase 22,500 of its common shares at $8 each. The options are exercisable after one year. The market price of common averaged $12 per share during the quarter ending on March 31, 2013. There was no change in the 165,000 shares of outstanding common stock during the quarter ended March 31, 2013. Net income for the quarter was $8,718. The number of shares to be used in computing diluted earnings per share for the quarter is: 180,000. 187,500. 165,000. 172,500.

Explanation / Answer

Answer is 187500

Particulars Amt Outstanding Shares 165000 Add: Potential equity shares for stock options 22500 Shares for diluted earnings 187500

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