CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Coren Inc. had 500,000 common shares issued and outstanding at December 31, 2014. On July 1, 2015, an additional 50,000 common shares were issued for cash. Coren also had unexercised stock options to purchase 40,000 common shares at $15 per share outstanding at the beginning and end of 2015. The average market price of Coren's common shares was $20 during 2015. What is the number of shares that should be used in calculating diluted earnings per share for the year ending December 31, 2015?
A. 525,000
B. 535,000
C. 565,000
Explanation: 500,000 + (50,000 x 6/12) + [40,000 - (40,000 x $15/20)] = $535,000

User Contributed Comments 6

User Comment
swift it states options unexercised at end of year - why do we assume they have been exercised?
SammyD9 As i understand it, dilutive eps is the hypothetical situation: they exercise, buy back 40k shares, reissue the 40k plus another 10k from the profit made on options
Beret 40.000 x 15 = 600.000, buys 30.000 shares back. Net new shares is 10.000. So
510.000 x 6/12 + 560.000 x 6/12 = 535.000
wundac Sammyd9 is correct. That's exactly how we need to think about this one.
ColonelCFA Just make sure you don't gloss over the question like I did and only read "ending" and not "beginning" and think that they don't apply.
Rsanches What is the difference if the word "beginning" doesn't exist?
You need to log in first to add your comment.