Question

Kilian company issued stock options on august 1, year 1. for the purpose of calculating dilutive eps for the year ended december 31, year 2, the options should be assumed to have been exercised on ______

multiple choice
a. december 31, year 1.
b. august 1, year 1.
c. december 31, year 2.
d. january 1, year 2.

Answer 1

In the context of calculating dilutive EPS for Kilian Company, stock options issued on August 1, Year 1, are assumed to be exercised at the beginning of the reporting period, resulting in the answer being January 1, Year 2. D

Step-by-step explanation:

When calculating dilutive EPS (Earnings Per Share), stock options that are considered dilutive should be treated as exercised at the start of the period that would maximize the dilutive effect on EPS.

Since the Kilian Company issued stock options on August 1, Year 1, for the purpose of calculating dilutive EPS for the year ended December 31, Year 2, the options should be assumed to have been exercised on the earliest date of the reporting period, which is January 1, Year 2.

This is because any potential dilution would affect the EPS calculation for the entire fiscal year. Therefore, the mentioned correct option in final answer is (d) January 1, Year 2.