Witter House is a calendar-year firm with 310 million common shares outstanding throughout 2024 and 2025. As part of its executive compensation plan, at January 1, 2023, the company had issued 35 million executive stock options permitting executives to buy 35 million shares of stock for $12 within the next eight years, but not prior to January 1, 2026. • The fair value of the options was estimated on the grant date to be $3 per option. • In 2024, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 20 million restricted common shares to senior executives at January 1, 2024. • The shares vest four years later. • The fair value of the stock was $14 per share on the grant date. • The average price of the common shares was $14 and $20 during 2024 and 2025, respectively. • The stock options qualify as an incentive plan. • The restricted stock does not. • The company's net income was $160 million and $170 million in 2024 and 2025, respectively. Required: 1. Compute basic and diluted earnings per share for Witter House in 2024. 2. Compute basic and diluted earnings per share for Witter House in 2025.
Witter House is a calendar-year firm with 310 million common shares outstanding throughout 2024 and 2025. As part of its executive compensation plan, at January 1, 2023, the company had issued 35 million executive stock options permitting executives to buy 35 million shares of stock for $12 within the next eight years, but not prior to January 1, 2026. • The fair value of the options was estimated on the grant date to be $3 per option. • In 2024, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 20 million restricted common shares to senior executives at January 1, 2024. • The shares vest four years later. • The fair value of the stock was $14 per share on the grant date. • The average price of the common shares was $14 and $20 during 2024 and 2025, respectively. • The stock options qualify as an incentive plan. • The restricted stock does not. • The company's net income was $160 million and $170 million in 2024 and 2025, respectively. Required: 1. Compute basic and diluted earnings per share for Witter House in 2024. 2. Compute basic and diluted earnings per share for Witter House in 2025.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Vishnu
Transcribed Image Text:Witter House is a calendar-year firm with 310 million common shares outstanding throughout 2024 and 2025. As part of its executive
compensation plan, at January 1, 2023, the company had issued 35 million executive stock options permitting executives to buy 35
million shares of stock for $12 within the next eight years, but not prior to January 1, 2026.
• The shares vest four years later.
• The fair value of the stock was $14 per share on the grant date.
• The average price of the common shares was $14 and $20 during 2024 and 2025, respectively.
• The stock options qualify as an incentive plan.
• The restricted stock does not.
• The company's net income was $160 million and $170 million in 2024 and 2025, respectively.
Required:
1. Compute basic and diluted earnings per share for Witter House in 2024.
2. Compute basic and diluted earnings per share for Witter House in 2025.
Note: Do not round intermediate calculations. Except for per share amounts, enter your answers in millions (i.e., 10,000,000
should be entered as 10). Round "Earnings per share" answer to 2 decimal places. Round "Denominator" answers to 2
decimal places.
1.
• The fair value of the options was estimated on the grant date to be $3 per option.
• In 2024, Witter House began granting employees stock awards rather than stock options as part of its equity compensation
plans and granted 20 million restricted common shares to senior executives at January 1, 2024.
2.
Basic
Diluted
Basic
Diluted
$
S
$
S
Answer is complete but not entirely correct.
Numerator
160 는
160
170
170
÷
+
+
Denominator
11
310
354.29 =
310
351.33
$
=
69
$
= $
69
Earnings per
share
0.52
0.45
0.55
0.48
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