Standard Corp’s net income for 2023 is $150,000. The only potentially dilutive securities outstanding were 1,000 call options issued during 2022, with each option being exercisable for one share at $20. None have been exercised, and 30,000 common shares were outstanding during 2023. The average market price of the company’s shares during 2023 was $25.

Instructions

a. Calculate diluted earnings per share for the year ended December 31, 2023. Round to the nearest cent.

b. Assuming that the 1,000 call options were instead issued on November 1, 2023 (rather than in 2022), calculate diluted earnings per share for the year ended December 31, 2023. Round to the nearest cent. The average market price during the last two months of 2023 was $25.

c. How would your answers for parts (a) and (b) change if, in addition to the information for parts (a) and (b), the company issued (wrote) 1,000 put options with an exercise price of $15?