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Horrocks Company granted 180,000 restricted stock awards of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. Horrocks' common shares have a market price of $10 per share on January 1, 2017, the grant date, and at December 31, 2018, averaging $10 throughout the year.
When calculating diluted EPS at December 31, 2018, the net increase in the denominator of the EPS fraction will be:

A. 0 shares.
B. 60,000 shares.
C. 120,000 shares.
D. 180,000 shares.

Respuesta :

temmydbrain

Answer:

c. 120,000 shares

Explanation:

[tex]\frac{No adjustment to the numerator}{180,000-60,000= 120,000}[/tex]

*Assumed purchase of treasury shares

$600,000

//[tex]\frac{10}{60,000}[/tex]

Note: The proceeds also must be increased (or decreased) by any tax benefits that would be added to (or deducted from) paid-in capital when the eventual tax deduction differs from the amount expense, the "excess tax benefit." Since that occurs when the stock price at vesting differs from the stock price at the grant date, the fact that the market price remained at $10 avoided that issue.

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