Problem
McManus Inc. reported net earnings of $400,000 for the year. McManus has 200,000 shares of common stock outstanding all year. On March 31, the company granted 40,000 stock options that allow employees to purchase shares for $15 each. The company stock has averaged $20 in the market during the year. Compute the basic and diluted EPS.
Receive equipment on signing 5-year noncancelable lease to begin today and pay first of 5 annual payments of $26,000, including $2,000 for annual property tax:
6-year useful life for equipment & straight-line method used
11% Incremental borrowing rate & 10% lease implicit rate
$100,000 present value of the minimum lease payments
$100,000 fair value of equipment
Equipment reverts to lessor & no bargain purchase option.