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    Basic and diluted earnings per share

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    Franklin Corporation had 100 shares of common stock issued and outstanding at December 31, 2010. On July 1, 2011, Franklin issued a 10 percent stock dividend. Unexercised stock options to purchase 20 shares of common stock (adjusted for the 2011 stock dividend) at $20 per share were outstanding at the beginning and end of 2011. The average market price of Franklin's common stock (which was not affected by the stock dividend) was $25 per share during 2011. The ending market price was $40. Net income for the year ended December 31, 2011, was $2,200.

    What were Franklin's 2011 basic and diluted earnings per share, rounded to the nearest cent?

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    Solution Summary

    Basic and diluted earnings per share are examined.