Exercise 19-20 EPS; shares issued; stock options [LO19-6, 19-7, 19-8, 19-9] Stanley Department Stores reported net...
Exercise 19-20 EPS; shares issued; stock options [LO19-6, 19-7, 19-8, 19-9]
Stanley Department Stores reported net income of $746,000 for
the year ended December 31, 2018.
Additional Information:
| Common shares outstanding at Jan. 1, 2018 | 70,000 |
| Incentive stock options (vested in 2017) outstanding throughout 2018 | 12,000 |
| (Each option is exercisable for one common share at an exercise price of $21.50) | |
| During the year, the market price of Stanley’s common stock averaged $25.8 per share. | |
| On Aug. 30 Stanley sold 15,000 common shares. | |
| Stanley’s only debt consisted of $33,000 of 10% short term bank notes. | |
| The company’s income tax rate is 40%. | |
Required:
Compute Stanley’s basic and diluted earnings per share for the year ended December 31, 2018. (Enter your answers in thousands.)
Homework Answers
Answer
Answer in thousands:
1.
Basic earnings per share for the year ended December 31:
=Net income / Outstanding shares
=$746 / (70+15*4/12)
=$746 / 75 shares
=$9.95 per share
2.
Diluted earnings per share for the year ended December 31:
=$746 / (70 + [15*4/12] + [12-10])
=$746 / (70 + 5 + 2)
=9.69 per share
Purchase Incentive stock options:
=12000 shares*$21.50 = 258000
=258000/25.8
Total shares 10000 shares
Add Answer to:
Exercise 19-20 EPS; shares issued; stock options [LO19-6, 19-7,
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