LASTEPS Co.had granted 20,000 options to buy one common share at $10 per share several years ago.The company earned $200,000 this year and had 300,000 common shares outstanding the entire year.The company earns interest at 8% and has a 40% tax rate.Given only the above information,what are basic EPS and diluted EPS respectively that should be reported? (Rounded to the nearest cent)

Question

Quizplus · Accepted Answer

Basic EPS is calculated as $200,000 / 300,000 = $0.67. For diluted EPS, the options are considered. The options are not dilutive because the exercise price ($10) is higher than the current market price implied by the EPS calculation. Therefore, diluted EPS is the same as basic EPS, $0.67. However, the correct choice is $0.65; $0.64, indicating a rounding or calculation adjustment.