Question

January 1, 2016, Karev Corporation granted options to purchase 4,900 of its common shares at $5 each. The market price of common stock was $11 per share on March 31, 2016, and averaged $11 per share during the quarter then ended. There was no change in the 72,868 shares of outstanding common stock during the quarter ended March 31, 2016. Net income for the quarter was $67,104. The diluted earnings per share for the quarter is $ decimal places (Round your answer 2

Answer 1

$.863

Step-by-step explanation:

Diluted EPS=Net income-preferred stock dividend (if any)/Average outstanding shares during the period

Diluted EPS=$67,104/(72,868+4,900)

=$.863

In diluted EPS, all the potential conversion into common stocks are deemed to be converted for purposes of calculating weighted average shares.Therefore options have also been accounted for in above working.