Marion Company has 30,000 shares of common stock outstanding during all of 2016.

Question

Marion Company has 30,000 shares of common stock outstanding during all of 2016. This common stock has been selling at an average market price of $45 per share. Marion also has outstanding for the entire year compensatory share options to purchase 4,000 shares of common stock at $32 per share. The unrecognized compensation cost (net of tax) relating to these share options is $3 per share. During 2016, Marion earned income of $36,000 after income taxes of 30%.

1. Compute Marion's 2016 diluted earnings per share. If required, round your answer to two decimal places.

2. Assume Marion uses IFRS. Compute its earnings per share assuming IFRS is used. If required, round your answer to two decimal places.

Explanation / Answer

1.

Compute Marion's 2016 diluted earnings per share:

(Profit or loss attributable to common equity holders of parent company
+ After-tax interest on convertible debt + Convertible preferred dividends)
(Weighted average number of common shares outstanding during the period
+ All dilutive potential common stock)

Adjusted net profit for the current year before tax effect ($36,000*100/70) = $51,429.

Number shares used for calculation of diluted EPS (30,000 + 4,000) = 34,000

Diluted EPS = $51,429 / 34,000

= $1.512

2.

Calculating diluted earnings per share, an article shall regulate profit or loss attributable to ordinary equity holders of the parent entity, and the weighted average number of shares outstanding, for the belongings of all dilutive possible normal shares.

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