FREE Trial

Standard Corp's net income for 2017 is $150,000. The only potentially dilutive securities outstanding were 1,000 call

Question:

Standard Corp's net income for 2017 is $150,000. The only potentially dilutive securities outstanding were 1,000 call options issued during 2016, with each option being exercisable for one share at $20. None have been exercised, and 30,000 common shares were outstanding during 2017. The average market price of the company's shares during 2017 was $25.
Instructions
(a) Calculate diluted earnings per share for the year ended December 31, 2017. (Round to nearest cent.)
(b) Assuming that the 1,000 call options were instead issued on November 1, 2017 (rather than in 2016), calculate diluted earnings per share for the year ended December 31, 2017. (Round to nearest cent.) The average market price during the last two months of 2017 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?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 72% (11 reviews)

a Since the options are in the money ie the exercise price is below the avera...View the full answer


answer-question-section
Answered By
tutor-profile-image
FREDRICK MUSYOKI
Professional Qualities: Solution-oriented. Self-motivated. Excellent problem-solving and critical thinking skills. Good organization, time management and prioritization. Efficient troubleshooting abilities. Tutoring Qualities: I appreciate students as individuals. I am used to tailoring resources for individual needs. I can integrate IT into student's lessons. I am good at explaining concepts. I am able to help students progress. I have a wide curriculum knowledge.
5.00+ 1+ Reviews 10+ Question Solved
Related Book For  book-img-for-question
Intermediate Accounting

Intermediate Accounting

ISBN: 978-1119048541

11th Canadian edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

See More Books
Question Posted:
See More Questions

Related Video

A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.

Students also viewed these Cost Accounting questions

Engineering Electromagnetics 7th Edition - ISBN: 0073104639 - Free Book