The calculation of diluted earnings per share assumes that stock options were exercised and that the proceeds were used to buy treasury stock at:
A) The average market price for the reporting period.
B) The market price at the end of the period.
C) The purchase price stated on the options.
D) The stock's par value.

Question

Quizplus · Accepted Answer

Diluted earnings per share calculation assumes that stock options were exercised and the proceeds were used to buy treasury stock at the average market price for the reporting period. This is because using the average market price reflects the fluctuations in the market over the entire reporting period, rather than just at a specific point in time (end of the period). The purchase price stated on the options or the stock's par value are not relevant in this calculation.

The Calculation of Diluted Earnings Per Share Assumes That Stock