Calculate the incremental shares outstanding

Reference no: EM132674492

Problem - Martinez Inc. had 503,000 common shares outstanding for the entire fiscal year ended August 31, 2020. Martinez has 103,000 outstanding $2 cumulative, no-par value preferred shares. All shares were outstanding for the full year. Options were written at the start of the fiscal year to purchase 31,000 common shares at $16 per share. The average market price of Martinez's common shares during the year ended August 31, 2020 was $25 per share. The options expire in 2029, and none were actually exercised during the current year. Also outstanding for the entire year was a 8% bond with a face value of $5,500,000, convertible to 125,000 common shares. Martinez Inc.'s net income for the year was $2,695,850, and the income tax rate for the fiscal year was 40%. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).

Calculate the proceeds from assumed exercise of 31,000 options.

Calculate the incremental shares outstanding upon the exercise of options.

Calculate Martinez Inc.'s diluted earnings per share for the year ended August 31, 2020.

Reference no: EM132674492

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