Marin Companys net income for 2017 is 49400 The only potenti

Marin Company’s net income for 2017 is $49,400. The only potentially dilutive securities outstanding were 900 options issued during 2016, each exercisable for one share at $6. None has been exercised, and 10,200 shares of common were outstanding during 2017. The average market price of Marin’s stock during 2017 was $25.

(a) Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. $2.55.)

(b) Assume the same facts as those assumed for part (a), except that the 900 options were issued on October 1, 2017 (rather than in 2016). The average market price during the last 3 months of 2017 was $25. (Round answer to 2 decimal places, e.g. $2.55.)

Diluted earnings per share

Solution

a Diluted shares = 900-(900*6/25)= 684 Total shares for diluted earnings = 10200+684 = 10884 Diluted earnings per share = 49400/10884= 4.54 b Total shares for diluted earnings = 10200+(684/12*3) = 10371 Diluted earnings per share = 49400/10371= 4.76