D is corrent. The weighted-average shares outstanding is computed by multiplying the number of common shares outstanding times the portion of the year the shares were outstanding.| Number of outstanding shares: | | | | | | Total weighted-average shares outstanding | | | 15,750 |
The diluted earnings per share is then calculated by adding the total weighted-average common shares outstanding to the weighted-average shares of all potentially dilutive securities. Ian Co. has 10,000 incentive stock options with an exercise price of $30. If the treasury stock method is used to account for these potentially dilutive securities, it is assumed that the 10,000 options are exercised at $30 (10,000 × $30 = $300,000), and the $300,000 would be used to retire as many shares as possible at the year-end price of $25 per share ($300,000/$25 = 12,000 shares retired.) Since 10,000 additional shares would be issued and 12.000 shares would be retired, the incentive stock options are considered antidilutive and are not included in the calculation of diluted earnings per share. Therefore, diluted earnings per share is calculated by dividing $125,000 net income by the 15,750 weighted-average common shares outstanding which equals $7.94 ($125,000 ÷ 15,750).A is incorrect. The weighted-average shares outstanding is computed by multiplying the number of common shares outstanding times the portion of the year the shares were outstanding.| Number of outstanding shares: | | | | | | Total weighted-average shares outstanding | | | 15,750 |
The diluted earnings per share is then calculated by adding the total weighted-average common shares outstanding to the weighted-average shares of all potentially dilutive securities. Ian Co. has 10,000 incentive stock options with an exercise price of $30. If the treasury stock method is used to account for these potentially dilutive securities, it is assumed that the 10,000 options are exercised at $30 (10,000 × $30 = $300,000), and the $300,000 would be used to retire as many shares as possible at the year-end price of $25 per share ($300,000/$25 = 12,000 shares retired.) Since 10,000 additional shares would be issued and 12.000 shares would be retired, the incentive stock options are considered antidilutive and are not included in the calculation of diluted earnings per share. Therefore, diluted earnings per share is calculated by dividing $125,000 net income by the 15,750 weighted-average common shares outstanding which equals $7.94 ($125,000 ÷ 15,750).B is incorrect.The weighted-average shares outstanding is computed by multiplying the number of common shares outstanding times the portion of the year the shares were outstanding.| Number of outstanding shares: | | | | | | Total weighted-average shares outstanding | | | 15,750 |
The diluted earnings per share is then calculated by adding the total weighted-average common shares outstanding to the weighted-average shares of all potentially dilutive securities. Ian Co. has 10,000 incentive stock options with an exercise price of $30. If the treasury stock method is used to account for these potentially dilutive securities, it is assumed that the 10,000 options are exercised at $30 (10,000 × $30 = $300,000), and the $300,000 would be used to retire as many shares as possible at the year-end price of $25 per share ($300,000/$25 = 12,000 shares retired.) Since 10,000 additional shares would be issued and 12.000 shares would be retired, the incentive stock options are considered antidilutive and are not included in the calculation of diluted earnings per share. Therefore, diluted earnings per share is calculated by dividing $125,000 net income by the 15,750 weighted-average common shares outstanding which equals $7.94 ($125,000 ÷ 15,750).C is incorrect. The weighted-average shares outstanding is computed by multiplying the number of common shares outstanding times the portion of the year the shares were outstanding.| Number of outstanding shares: | | | | | | Total weighted-average shares outstanding | | | 15,750 |
The diluted earnings per share is then calculated by adding the total weighted-average common shares outstanding to the weighted-average shares of all potentially dilutive securities. Ian Co. has 10,000 incentive stock options with an exercise price of $30. If the treasury stock method is used to account for these potentially dilutive securities, it is assumed that the 10,000 options are exercised at $30 (10,000 × $30 = $300,000), and the $300,000 would be used to retire as many shares as possible at the year-end price of $25 per share ($300,000/$25 = 12,000 shares retired.) Since 10,000 additional shares would be issued and 12.000 shares would be retired, the incentive stock options are considered antidilutive and are not included in the calculation of diluted earnings per share. Therefore, diluted earnings per share is calculated by dividing $125,000 net income by the 15,750 weighted-average common shares outstanding which equals $7.94 ($125,000 ÷ 15,750). |
