On January 1, 2018, Hage Corporation granted incentive stock options to purchase 18,000 of its common shares at $7 each. The options are exercisable after one year. The market price of common averaged $9 per share during the quarter ending on March 31, 2018. There was no change in the 100,000 shares of outstanding common stock during the quarter ended March 31, 2018. Net income for the quarter was $8,268. The number of shares to be used in computing diluted earnings per share for the quarter is:

Question

Quizplus · Accepted Answer

Proceeds from exercise of options = 18,000 shs × $7 = $126,000
Used to repurchase common stock at average market price = $126,000 ÷ $9 = 14,000 shares 11ea937b_359e_a09e_a419_99d5496c230a_TB2599_00 Shares for Diluted EPS = 100,000 + 4,000 = 104,000

On January 1, 2018, Hage Corporation Granted Incentive Stock Options