Patel Co. had net income for 2020 of $500,000. The average number of shares outstanding for the period was 200,000 shares. The average number of shares under ou
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1. User Answers abiolataiwo2015
Answer:
$2.46
Explanation:
Calculation to determine What should Patel Co. report for diluted earnings per share for the year ended 2020
First step is to calculate the proceeds
Proceeds = 12000 × $30
Proceeds= $36,000
Second step is to calculate the Shares assumed purchased
Shares assumed purchased ($36,000 ÷ $40)
Shares assumed purchased = 9000shares.
Third step is to calculate the Incremental share issued
Incremental share issued (12000  9000)
Incremental share issued = 3000 shares
Now let calculate the Diluted EPS using this formula
Diluted EPS = (Net income ÷ Average Weighted shares + incremental share issued))
Let plug in the formula for
Diluted EPS = ($500,000 ÷ (200,000+3000))
Diluted EPS = $500,000 ÷ 203,000
Diluted EPS = $2.46
Therefore What should Patel Co. report for diluted earnings per share for the year ended 2020 is $2.46