Question

Swifty Corporation had net income for 2021 of $605000. The average number of shares outstanding for the period was 192000 shares. The average number of shares under outstanding options, at an option price of $31 per share is 12600 shares. The average market price of the common stock during the year was $36. What should Swifty Corporation report for diluted earnings per share for the year ended 2021?

Answer 1

Answer:

$3.12 per share

Explanation:

Diluted shares outstanding:

= Shares outstanding for the period × Shares outstanding under an option price of $31 per share[(average market price - option price) ÷ average market price]

= 192,000 + 12,600 × [($36 - $31) ÷ $36]

= 192,000 + 1,750

= 193,750

Diluted earnings per share:

= Net Income ÷ Total Diluted shares outstanding

= $605,000 ÷ 193,750

= $3.12 per share