January 1, 2009, Hage Corporation Granted Incentive Stock Options to Purchase

Multiple Choice

January 1, 2009, Hage Corporation granted incentive stock options to purchase 18,000 of its common shares at $7 each. The options are exercisable after one year. The market price of common was $10.50 per share on March 31, 2009, and averaged $9 per share during the quarter then ended. There was no change in the 100,000 shares of outstanding common stock during the quarter ended March 31, 2009. Net income for the quarter was $8,268. The number of shares to be used in computing diluted earnings per share for the quarter is:

A) 100,000.
B) 104,000.
C) 106,000.
D) 118,000.Proceeds from exercise of options = 18,000 shs.$7 = $126,000 Used to repurchase common stock at average market price = $126,000 $9 = 14,000 shs.Shares for Diluted EPS = 100,000 + 4,000 = 104,000