Witter House is a calendar-year firm with 490 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 55 million executive stock options permitting executives to buy 55 million shares of stock for $15 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated on the grant date to be $3 per option. In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 30 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of the stock was $20 per share on the grant date. The average price of the common shares was $20 and $25 during 2021 and 2022, respectively. The stock options qualify as an incentive plan. The restricted stock does not. The company's net income was $340 million and $350 million in 2021 and 2022, respectively. Required: 1. Compute basic and diluted earnings per share for Witter House in 2021. 2. Compute basic and diluted earnings per share for Witter House in 2022.
Witter House is a calendar-year firm with 490 million common shares outstanding throughout 2021 and 2022. As part of its executive compensation plan, at January 1, 2020, the company had issued 55 million executive stock options permitting executives to buy 55 million shares of stock for $15 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated on the grant date to be $3 per option. In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 30 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of the stock was $20 per share on the grant date. The average price of the common shares was $20 and $25 during 2021 and 2022, respectively. The stock options qualify as an incentive plan. The restricted stock does not. The company's net income was $340 million and $350 million in 2021 and 2022, respectively. Required: 1. Compute basic and diluted earnings per share for Witter House in 2021. 2. Compute basic and diluted earnings per share for Witter House in 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Witter House is a calendar-year firm with 490 million common shares outstanding throughout 2021 and 2022. As part of its executive
compensation plan, at January 1, 2020, the company had issued 55 million executive stock options permitting executives to buy 55
million shares of stock for $15 within the next eight years, but not prior to January 1, 2023. The fair value of the options was estimated
on the grant date to be $3 per option.
In 2021, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and
granted 30 million restricted common shares to senior executives at January 1, 2021. The shares vest four years later. The fair value of
the stock was $20 per share on the grant date. The average price of the common shares was $20 and $25 during 2021 and 2022,
respectively.
The stock options qualify as an incentive plan. The restricted stock does not. The company's net income was $340 million and $350
million in 2021 and 2022, respectively.
Required:
1. Compute basic and diluted earnings per share for Witter House in 2021.
2. Compute basic and diluted earnings per share for Witter House in 2022.
(For all requirements, do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places (i.e..
10,000,000 should be entered as 10). Round "Earnings per share" answers to 2 decimal places.)
1.
2
Basic
Diluted
Basic
Diluted
$
$
$
$
Answer is complete but not entirely correct.
Denominator
Numerator
340/
340/
350/
··
350
490
540.00
490-
520.00-
$
S
$
Earnings per
share
0.69
0.65
0.71
0.67
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