Question

Blue Cab Company had 60,000 shares of common stock outstanding on January 1, 2021. On April 1, 2021, the company issued 30,000 shares of common stock. The company had outstanding fully vested incentive stock options for 10,000 shares exercisable at $11 that had not been exercised by its executives. The end-of-year market price of common stock was $23 while the average price for the year was $22. The company reported net income in the amount of $319,915 for 2021. What is the diluted earnings per share (rounded)

Answer 1

$3.46

Step-by-step explanation:

Diluted earnings per share = Earnings attributable to holders of common stock ÷ Weighted Average Number of Common Stocks outstanding

where,

Earnings attributable to holders of common stock = $319,915

and

Weighted Average Number of Common Stocks outstanding

outstanding on January 1, 2021 = 60,000 shares

additional shares (9/ 12 x 30,000) = 22,500 shares

Option stocks = 10,000 shares

Total = 92,500 shares

therefore,

Diluted earnings per share = $319,915 / 92,500 shares = $3.46