Computing EPS: Contingently Issuable Shares On January 1, 2020, to motivate top management, Resume Inc. granted 2,600 options to purchase common stock at $10 per share to key officers if net income increased by 5% in 2020 over the prior year. The fair value of the options on January 1, 2020, is estimated to be $13,000. Resume Inc. reported net income of $130,000 in 2020, which represented a 7% increase over the prior year. How will the options affect the calculation of the company's 2020 diluted earnings per share? Increase ✓the denominator ✓by 100 x shares.
Computing EPS: Contingently Issuable Shares On January 1, 2020, to motivate top management, Resume Inc. granted 2,600 options to purchase common stock at $10 per share to key officers if net income increased by 5% in 2020 over the prior year. The fair value of the options on January 1, 2020, is estimated to be $13,000. Resume Inc. reported net income of $130,000 in 2020, which represented a 7% increase over the prior year. How will the options affect the calculation of the company's 2020 diluted earnings per share? Increase ✓the denominator ✓by 100 x shares.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Computing EPS: Contingently Issuable Shares
On January 1, 2020, to motivate top management, Resume Inc. granted 2,600 options to purchase
common stock at $10 per share to key officers if net income increased by 5% in 2020 over the prior year.
The fair value of the options on January 1, 2020, is estimated to be $13,000. Resume Inc. reported net
income of $130,000 in 2020, which represented a 7% increase over the prior year. How will the options
affect the calculation of the company's 2020 diluted earnings per share?
Increase
✓the denominator
✓by
100 x shares.
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