Answered: What is Farewell's diluted earnings per… | bartleby

FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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During 2021, Farewell Inc. had 500,000 shares of common stock and 50,000 shares of 6% cumulative preferred stock
outstanding. The preferred stock has a par value of $100 per share. Farewell did not declare or pay any dividends during 2021.
Farewell's net income for the year ended December 31, 2021, was $2.5 million. The income tax rate is 25%. Farewell granted
10,000 stock options to its executives on January 1 of this year. Each option gives its holder the right to buy 20 shares of
common stock at an exercise price of $29 per share. The options vest after one year. The market price of the common stock
averaged $30 per share during 2021.
What is Farewell's diluted earnings per share for 2021, rounded to the nearest cent?
O $3.14.
O $4.90.
$4.34.
O Cannot determine from the given information.

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A3
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