Exercise 16-26 Warning Don\'t show me this message again for the assignment Ok C
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Exercise 16-26
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Exercise 16-26
Splish Company’s net income for 2017 is $54,900. The only potentially dilutive securities outstanding were 800 options issued during 2016, each exercisable for one share at $6. None has been exercised, and 10,200 shares of common were outstanding during 2017. The average market price of Splish’s stock during 2017 was $20.(a) Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)
Diluted earnings per share $
(b) Assume the same facts as those assumed for part (a), except that the 800 options were issued on October 1, 2017 (rather than in 2016). The average market price during the last 3 months of 2017 was $20. (Round answer to 2 decimal places, e.g. $2.55.)
Diluted earnings per share $
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Explanation / Answer
Answer to Part a)
Calculation of Number of Shares outstanding:
Proceeds if shares issued (800 * $6)
4,800
Purchase price for treasury shares
$20
Shares assumed to be purchased
240
Shares issued
800
Incremental share
560
Current Outstanding Shares
10,200
Shares Outstanding
10,760
Diluted EPS = 54,900 / 10,760
Diluted EPS = $5.10
Answer to Part b)
Calculation of Number of Shares outstanding:
Proceeds if shares issued (800 * $6)
4,800
Purchase price for treasury shares
$20
Shares assumed to be purchased
240
Shares issued
800
Incremental share
560
Weight for 3months assumed outstanding
3/12
Weighted incremental share increase
140
Current Outstanding Shares
10,200
Shares Outstanding
10,340
Diluted EPS = 54,900 / 10,340
Diluted EPS = $5.31
Proceeds if shares issued (800 * $6)
4,800
Purchase price for treasury shares
$20
Shares assumed to be purchased
240
Shares issued
800
Incremental share
560
Current Outstanding Shares
10,200
Shares Outstanding
10,760
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