Question #30
Reading: Reading 9 Employee Compensation - Post-Employment and Share-Based
PDF File: Reading 9 Employee Compensation - Post-Employment and Share-Based.pdf
Page: 12
Status: Correct
Correct Answer: A
Question
The number of potentially dilutive securities for the option grant at the end of 20X1 is closest to:
Answer Choices:
A. 50,000
B. 3,559
C. 100,000
Explanation
Cash proceeds = number of options x exercise price = 150,000 x 16 = $2,400,000
Unrecognized compensation expense at the beginning of the year = 0 (plan just started)
Unrecognized compensation expense at the end of the first year = 268,500 – 89,500 =
$179,000
Average unrecognized share-based compensation expense = (179,000 + 0)/2 = $89,500
Assumed proceeds = 2,400,000 + 89,500 = 2,489,500
Number of treasury shares = assumed proceeds / average share price during the reporting
period
= 2,489,500 / 17 = 146,441
Dilutive shares = 150,000 – 146,441 = 3,559