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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Aiken Corporation has compensatory share options for employees to purchase 4,000 common shares at $12 per share outstanding the entire year. The average market price for the common stock during the year was $20 per share. The unrecognized compensation cost (net of tax) related to the share options is $1 per share. What is the assumed increment in the denominator for computing Aiken’s diluted earnings per share?

To determine

Identify the assumed increment given in the denominator for computing Company A diluted earnings per share.

Explanation

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Particulars  
Shares issued from assumed exercise4,000
Shares assumed reacquired (1)(2,600)
Assumed increment in common shares for computing dilutedearnings per share1,400

(Table 1)

Working note:

(1) Calculate the shares that are assumed to be reacquired:

Shares assumed reacquired =Common shares × (

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