n 2022, Farmington Corporation had 2,000 outstanding stock options, where employees could purchase shares of common stock at a discounted rate of $25 per share. The common stock currently has a market value of $40 per share. Farmington has total net income for 2022 of $500,000, a tax rate of 20%, and 600,000 outstanding shares of stock (outstanding the entire year). a) What is earnings per share (EPS) b) What is dilutive earnings per share (DEP)
In 2022, Farmington Corporation had 2,000 outstanding stock options, where employees could purchase shares of common stock at a discounted rate of $25 per share. The common stock currently has a market value of $40 per share. Farmington has total net income for 2022 of $500,000, a tax rate of 20%, and 600,000 outstanding shares of stock (outstanding the entire year).
a) What is earnings per share (EPS)
b) What is dilutive earnings per share (DEP)
The question is based on the concept of Financial Accounting.
Earning per share is calculated by dividing the earning available to the ordinary shareholders by the number of ordinary shares outstanding.
Diluted earning per share is calculated by dividing the earning available to the ordinary shareholders by the number of ordinary shares outstanding after considering the effect of potential ordinary shares.
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