JD Co. is a calendar-year firm with 600 million common shares outstanding throughout 2018 and 2019. As part of its executive compensation plan, at January 1, 2017, the company had issued 60 million executive stock options permitting executives to buy 60 million shares of stock for $10 per share within the next eight years, but not prior to January 1, 2020. The fair value of the options was estimated on the grant date to be $3 per option.
In 2018, JD began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 30 million restricted common shares to senior executives at January 1, 2018. The shares vest four years later. The fair value of the stock was $12 per share on the grant date. The average market price of the common shares was $12 and $15 during 2018 and 2019, respectively.
The stock options qualify for tax purposes as an incentive plan. The restricted stock does not. The company's income before tax was $400 million and $500 million, and the net income was $240 million and $300 million, in 2018 and 2019, respectively.
Required:
1. Determine basic and diluted earnings per share (rounded to 2 decimal places) for JD in 2018.
2. Determine basic and diluted earnings per share for JD (rounded to 2 decimal places) in 2019.

Question

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The Answer of JD Co. is a calendar-year firm with 600 million common shares outstanding throughout 2018 and 2019. As part of its executive compensation plan, at January 1, 2017, the company had issued 60 million executive stock options permitting executives to buy 60 million shares of stock for $10 per share within the next eight years, but not prior to January 1, 2020. The fair value of the options was estimated on the grant date to be $3 per option.
In 2018, JD began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 30 million restricted common shares to senior executives at January 1, 2018. The shares vest four years later. The fair value of the stock was $12 per share on the grant date. The average market price of the common shares was $12 and $15 during 2018 and 2019, respectively.
The stock options qualify for tax purposes as an incentive plan. The restricted stock does not. The company's income before tax was $400 million and $500 million, and the net income was $240 million and $300 million, in 2018 and 2019, respectively.
Required:
1. Determine basic and diluted earnings per share (rounded to 2 decimal places) for JD in 2018.
2. Determine basic and diluted earnings per share for JD (rounded to 2 decimal places) in 2019.

JD Co Is a Calendar-Year Firm with 600 Million Common Shares