The Following Information Was Extracted from Smurm Corporation's 2006 Annual

question 23

Multiple Choice

The following information was extracted from Smurm Corporation's 2006 annual report:
$\begin{array}{lr}\text { Common stock }\\\text { Shares outstanding } 12 / 31 / 05 & 90 \text { million } \\\text { New shares issued } 4 / 1 / 06 & 10 \text { million } \\\text { Shares outstanding } 12 / 31 / 06 & 100 \text { million }\end{array}$

$\text { Preferred stock }$
$\$ 10$ par, $10 \%$ , convertible into 2 shares of common stock, shares outstanding $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$50 \text { million }$
1 million options, each to purchase one common share at $\$ 50$ per share

$\begin{array}{lr} \text { Average for year} &\$75\\ \text { Beginning of year } &\$70\\ \text {End of year } &\$78\\\\ \text { Preferred dividends paid}&\$50,000,000\\ \text { Net income for 2006}&\$350,000,000\end{array}$
-Using the treasury stock method, calculate the number of extra shares being recognized in the diluted EPS calculation resulting from options.

• A)500,000
• B)358,975
• C)333,333
• D)285,714

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Definitions:

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