In 2014,TC Mulch Inc

question 71

Essay

In 2014,TC Mulch Inc.'s net income was $200,000.Mulch had 220,000 ordinary shares outstanding at year end.There were two ordinary share transactions during the year: i)Mulch declared and distributed a 4-for-1 stock split on March 1,2014; and ii)Option C was exercised on April 1,2014.Details of Mulch's stock option plans follow:
• Option A entitles employees to purchase 40,000 ordinary shares for $9.00 each.This option was granted during 2013 and expires in 2016.
• Option B entitles employees to purchase 40,000 ordinary shares for $21.00 each.This option was granted on July 1,2014 and expires in 2017.
• Option C entitles employees to purchase 40,000 ordinary shares for $13.00 each.This option was granted during 2012 and was exercised on April 1,2014.
• Option D entitles employees to purchase 40,000 ordinary shares for $17.00 each.This option was granted on September 1,2014 and expires in 2017.
The average market price of Mulch's ordinary shares for the year is $18.00.Mulch does not have any preferred shares or convertible bonds outstanding.The recorded exercise prices and number of shares that can be acquired under the stock option plans have already been adjusted for the stock split.
Requirements:
a.Calculate Mulch's basic earnings per share for the year ended December 31,2014.
b.Calculate Mulch's diluted earnings per share for the year ended December 31,2014.

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