Reference no: EM132494061

Point 1: The Brown Co. wad organized on January 1, 19x5, at which time it issued 10,000 shares of P10 par value common stock. On July 1, 19x5, Browndeclared and issueda 10% common stock dividend. On October 1, 19x5, an additional 2,000 shares of common stock were issued at par. The net income for the year ended Decembet 31, 19x5, was P12,650.

Point 2: As a result of the events described, Brown Co. had 13,000 shares of common stock outstanding ad of January 1, 19x6. On that date, options were granted to certain employees which entitled them to buy 1,000 shares of common stock at P16 per share. The average price of common stock during 19x6 was P20 per share. The price of the common stock on December 31, 19x6 was P25 per share. Net income for the year ended December 31, 19x6 was P29,172. No shares of common stock were issued during 19x6.

Question 1: Brown Co.'s basic earnings per share for the year ended December 31, 19x6, was: (SHOW SOLUTION)

a. P2.24

b. P2.08

c. P2.14

d. P2.18

Question 2: Diluted earnings per share for Brown Co. for the year ended December 31, 19x6, was: (SHOW SOLUTION)

a. P2.21

b. P2.08

c. P2.14

d. P2.18