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Assume that Orwell Associates began the year with 78,000 outstanding shares and implemented a 5% stock dividend on January 1 of the current year. Orwell
Assume that Orwell Associates began the year with 78,000 outstanding shares and implemented a 5% stock dividend on January 1 of the current year. Orwell employees held 95,000 options that were granted on May 1. If exercised, there would be 24,000 incremental shares. On June 1, Orwell implemented a 3-for-1 stock split. Finally, on November 1, the company purchased 138,000 shares to be held in the treasury. Requirement Compute the denominator for basic and diluted earnings per share. Assume that the stock split also applies to the options. Complete the table below to compute the denominator for basic and diluted earnings per share (EPS). Assume that the stock split also applies to the options. (Assume the options are dilutive. Combine the opening balance and the January 1 stock dividend on the first line of the table. Complete all input fields. Enter a "0" for any zero balances. Enter a decrease in shares with a minus sign or parentheses.) Date Event 1/1 Beg. balance and stock dividend 5/1 Option exercise Subtotal before the stock split 6/1 3-1 Stock Split Subtotal after the stock split 11/1 Treasury Stock Purchase 12/31 Balance Number of Shares Weight by Number of Months Shares Are Outstanding Weighted-Average Shares for Basic EPS Weighted-Average Shares for Diluted EPS
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