Ayayai Corporation reported net income of $404,670 in 2020 and had 184,000 shares of common stock outstanding throughout the year. Also outstanding all year were 43,500 options to purchase common stock at $12 per share. The average market price of the stock during the year was $15. Compute diluted earnings per share

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DeniceSandidge DeniceSandidge · Answer 1 · 2020-03-12T08:27:21+01:00

Answer:

diluted earning per share = $2.1 per share

Explanation:

given data

net income = $404,670

stock outstanding = 184,000 share

outstanding all year = 43,500

common stock = $12 per share

average market price = $15

solution

we get here diluted earning per share will be

diluted earning per share = net income attributable to common stock holder ÷ diluted weight average no of share .........................1

here diluted weight average no of share is

diluted weight average no of share = common stock outstanding + convertible option ..........2

here convertible option = total option available - no of share purchase

convertible option = 43500 - (43500×12 ÷15)

convertible option = 43500 - 34800 = 8700

so diluted weight average no of share = 184000 + 8700 = 192700

and

now put value in equation 1 we get

diluted earning per share = [tex]\frac{404670}{192700}[/tex]

diluted earning per share = $2.1 per share