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Bedard Corporation reported net income of \(300,000 in 2017 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at \)10 per share. The average market price of the stock during the year was $15. Compute diluted earnings per share.

Short Answer

Expert verified

The diluted earnings per share of Bedard Corporation is $1.40.

Step by step solution

01

The following information is given

Net Income $300,000

Common stock Outstanding 200,000 shares

Common stock $10 per share

Outstanding all year 45,000

The average market price of the stock is $15.

02

Computation of diluted earnings per share

Proceeds from assumed exercise of 45,000 options (45,000 X $10)

$450,000

Shares issued upon exercise

45,000

Treasury shares purchasable ($450,000 ÷ $15)

(30,000)

Incremental shares

15,000

Dilutedearningspershare=NetincomeCommonstockoutstanding+Incrementalshares=300,000200,000+15,000=$1.40

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Most popular questions from this chapter

Petrenko Corporation has outstanding 2,000 \(1,000 bonds, each convertible into 50 shares of \)10 par value common stock. The bonds are converted on December 31, 2017, when the unamortized discount is \(30,000 and the market price of the stock is \)21 per share. Record the conversion using the book value approach.

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