In 2017,TC Mulch Inc

question 104

Essay

In 2017,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 1,2017; and ii)Option C was exercised on April 1,2017.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 2016 and expires in 2019.
• Option B entitles employees to purchase 40,000 ordinary shares for $21.00 each.This option was granted on July 1,2017 and expires in 2020.
• Option C entitles employees to purchase 40,000 ordinary shares for $13.00 each.This option was granted during 2015 and was exercised on April 1,2017.
• Option D entitles employees to purchase 40,000 ordinary shares for $17.00 each.This option was granted on September 1,2017 and expires in 2020.
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.
Required:
a.Calculate Mulch's basic earnings per share for the year ended December 31,2017.
b.Calculate Mulch's diluted earnings per share for the year ended December 31,2017.

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Definitions:

Economic Well-being

The level of prosperity and quality of economic conditions that individuals or groups experience, often measured by income, employment, and access to resources.

Transfer Payments

Payments made by the government to individuals or other sectors without receiving a good or service in return, such as welfare, social security, and subsidies.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a given period of time, often used to measure the economic performance of a country.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of all goods and services produced by an economy in real terms.