Question

BE16.15 (LO 5) Bedard Corporation reported net income of $300,000 in 2020 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the stock during the year was $15. Compute diluted earnings per share.

Answer 1

$1.40 per share

Step-by-step explanation:

The computation of the diluted earning per share is shown below:

Diluted earning per share = Net income ÷ weighted number of shares

where,

Net income is $300,000

And, the weighted number of shares is

= 200,000 shares + (45,000 options - 45,000 options × $10 ÷ $15

= 200,000 shares + (45,000 options - 30,000 options)

= 200,000 shares + 15,000

= 215,000 shares

So, the diluted per share is

= $300,000 ÷ 215,000 shares

= $1.40 per share