Burkhart-P&amp;G

# Burkhart-P&amp;amp;G - Burkhart 1 Brittany Burkhart...

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Burkhart 1 Brittany Burkhart Professor Weaver 29 August 2009 Intermediate Accounting III Chapter 16 (a.) Under P& G’s stock based compensation plan, stock options are granted annually to key managers and directors. (1) How many options were granted during 2004 under the plan? The exercise prices are equal to the market price of the shares on the date of the grant. Grants that were issued after September 2002 are vested after three years and have a ten year life. Other minor grants are given to employees, which have different vesting terms and options. The company used the Black-Scholes option pricing model to estimate fair value. During 2004, 40,866 dollars worth of stock options were granted. (2) How many options were exercisable at June 30, 2004? On June 30, 2004, 151,828 dollars worth of options were exercisable. (3) How many options were exercised in 2004, and what was the average price of those exercised? In 2004, (22,307) options were exercised. The average price of the options exercised was 24.88. (4) What was the range of exercise prices for options outstanding at June 30, 2004? The lowest range went from 16.43 to 30.11, and had 36,863 shares outstanding. The range from 31.01 to 34.84 had 95,260 shares outstanding. The third range was from 35.10 to 46.24 and had 82,825 shares outstanding. The highest range went from 48.73 to 52.98, and had 61, 345 shares outstanding. Overall, the average prices went from 16.43 to 52.98.

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Burkhart 2 (5) How many years from the grant date do the options expire? Grants that were issued after September of 2002 are vested after three years and have a ten year life. So, they expire after ten years. (6) To what accounts are the proceeds from these option exercises credited? Since the stock options are issued with the exercise options equal to the market value of the shares, no compensation expense has resulted. (7) What was the number of outstanding options at June 30, 2004, and at what average exercise price? There were 276,293 outstanding options at the end of the year. The average price of options outstanding at the end of the year was 38.85. The average exercise price was 24.88. The average exercisable price, at the end of the year was 35.39. (b) What number of diluted weighted average common shares outstanding was used by P&G in computing earnings per share for 2004, 2003, and 2002? What was P&G’s diluted earnings per share in 2004, 2003, and 2002? Net earnings less preferred dividends are divided by the weighted average number of common shares outstanding during the year to calculate basic net earnings per common share. Then, diluted net earnings per common share are calculated to give effect to stock options and assuming conversion of preferred stock. 2,790.1 shares of diluted weighted average common shares outstanding were used in computing earnings per share in 2004, 2,802.6 in 2003, and 2,809.9 in 2002. The diluted net earnings were 6,477 in 2004, 5,177 in 2003, and 4,340 in 2002. P&G’s diluted earnings per common share were 2.32 for 2003-2004, and 1.85 in 2002-2003.
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## This note was uploaded on 11/29/2009 for the course ACC ACC300 taught by Professor Jones during the Spring '09 term at Central Pennsylvania.

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Burkhart-P&amp;amp;G - Burkhart 1 Brittany Burkhart...

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