Stockholders' Equity

Question 1

Employee compensation

Answer 1

Stock Options: record compensation expense at fair value of the equity instrument at date of grant (how much a stock option would trade for on that date)

Liabilities: FV of liability incurred

Question 2

Earnings per share

Answer 2

Basic EPS = NI available/weighted-average # of common shares outstanding.

NI available = net income less dividends declared and accumulated for the current period.

Outstanding options (if dilutive) are included in the denominator of diluted earnings per share weighted by number of months outstanding.