Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Problem: Earnings per Share.
(Pls help and provide supporting computations)
Transcribed Image Text:The following transactions occurred in 2022:
Feb 1 - Collected in full the balance on the May 1, 2021 Ordinary Shares subscription.
Issued the corresponding stock certificate.
Mar 1 - Retired 3,000 Ordinary Shares at P30.
Apr 1 - Employees exercised 60,000 share options. The market price of the share on this
date is P38.
Jul 1 - Converted 15,000 Preference Shares into Ordinary Shares.
Jul 1 - The company entered into an agreement which provides for the issuance of
additional ordinary shares based on the number of new branches established. The
company will issue 100,000 additional ordinary shares for each new branch opened from
July 1, 2022 to July 1, 2024.
Nov 1 - A new branch was opened in Clark City.
The Net Income for the year is P2,400,000.
The average market price of ordinary shares is P36.
Income tax rate is 30%.
REQUIRED:
Basic Earnings per share in 2020,2021 and 2022
b. Diluted Earnings per share in 2020,2021, and 2022
2020 Comparative Basic Earnings Per Share on December 31, 2021 and
а.
С.
2020 Comparative Diluted Earnings Per Share on December 31, 2021
Transcribed Image Text:EARNINGS PER SHARE
On January 1, 2020, Carmel Company has the following account balances:
12% Convertible Bonds Payable at Face Value
3,000,000
Premium on Bonds Payable
Ordinary Shares, P100 par, 200,000 shares authorized, 80,000 shares
103,152
8,000,000
Subscribed Ordinary Shares
750,000
Subscription Receivable - Ordinary
150,000
Ordinary Treasury Shares at Cost
525,000
Share Premium - Ordinary Shares
1,250,000
Share Premium - Conversion Privilege
Retained Earnings
451,680
5,000,000
Retained Earnings Appropriated for Ordinary Treasury Shares
525,000
Additional Information:
The P3M Bonds were issued on January 1, 2019 at 120. The bonds effective interest rate
after considering the conversion privilege is 10%. The term of the bonds is 3 years. Each
P1,000 bonds can be converted into 5 Ordinary Shares.
The following transactions occurred in 2020:
Mar 1 - Collected in full the Subscription Receivable and issued the corresponding Ordinary
Shares.
Jun 1- Reissued 2,000 Treasury Shares at P107.
Jul 1 - Declared a 10% Bonus Issue.
Oct 1 - Issued 20,000 of 8% Convertible Cumulative Preference Shares, P100 par at P103.
Each Preference Share is convertible into 2 Ordinary Shares.
The Net Income for the year is P1,500,000.
Income tax rate is 30%.
The following transactions occurred in 2021:
Jan 1- Issued 20,000 share options to employees, each exercisable for one share at P116.
The fair value of each share option is P20.
May 1 - Received subscription for 10,000 ordinary shares at P110. Collected 60% of the
subscription price.
Aug 1- A 4-for-1 share split is effected on Ordinary Shares.
As a result of this 4-for-1 share split, the equivalent Ordinary Shares for Convertible
Bonds, Convertible Preference Shares, and Share Options are also revised as follows:
Convertible Bonds
60,000
Convertible Preference Shares
160,000
Share Options
80,000
Exercise Price per Option Share is now equivalent to P29. Revised Fair Value of each
share option is P5.
Oct 1 - Reissued 5,000 Ordinary Treasury Shares at P40 per share.
Dec 31 - All of the P3M bonds were converted into Ordinary Shares.
Dec 31 - Declared a P2M dividends on Ordinary Shares. For Preference Shares: declared the
annual dividends plus the dividends equivalent to 3 months for 2020.
The Net Income for the year is P1,800,000.
The average market price of ordinary shares is P27.
Income tax rate is 30%.
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