Venzuela Company’s net income for 2020 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 10,000 shares of common were outstanding during 2020. The average market price of Venzuela’s stock during 2020 was $20.

Instructions

a. Compute diluted earnings per share. (Round to nearest cent.)

b. Assume the same facts as those assumed for part (a), except that the 1,000 options were issued on October 1, 2020 (rather than in 2019). The average market price during the last 3 months of 2020 was $20.