Reference no: EM132462730

The ABC Company has 1,000,000 on January 1, 2018 which is the beginning of their year end. They had the following share transactions during the years as follows:

• On June 30, 2018 there was a reverse stock split declared whereby each common shareholder will receive 1 common share for every 4 common shares they hold. In addition to this there was a 15% stock dividend declared on October 31, 2018.

• December 1, 2018 ABC company issued a stock split of 6 for 1.

• On February 28, 2018 the company issued 200,000 common shares as well as 200,000 common shares on April 1, 2018. The last share transaction for the ABC Company was on September 30, 2018 whereby they issued 100,000 common shares.

The company has a reported net income of $1,500,000 for the year end December 31, 2018 with an additional reporting of a $50,000 loss from discontinued operations. There is a stock option plan for the employees which was issued on June 1, 2017. The employees can purchase 100,000 shares for $8 per share. The market value of these shares at December 31, 2018 is currently $40 per share. The Company's income tax rate is 25%.

The preferred share general ledger account is reporting $1,200,000 in the value of the shares. These shares have a convertible feature of 1 common share for every 2 preferred shares. The shares have a stated value of $20 per share and the dividends are non-cumulative. There were no dividends declared in 2018 and 2017 dividends declared and paid were $25,000.

The company had the following bond issues:

Bonds D - Issued on July 1, 2017 for $1,000,000 with interest at 3%. These bonds are convertible to 50 common shares for every $1,000 bond.

Bonds A - Has a value of $800,000 with interest at 5%. These bonds were issued on December 31, 2018 and are convertible to 50 common shares for every $2,000 bond.

Bonds B - $1,000,000 value issued on March 1, 2018. The interest rate is 3% and they are convertible to 40 common shares for every $1,000 bond.

Bonds C - interest is at 8%, and they were issued on June 30, 2016 with a value of $1,500,000. they can be converted to 23 common shares for every $100 bond.

Question a) A schedule (WITH COLUMN HEADINGS) outlining the share transactions during the year and determine the weighted average number of common shares outstanding. Schedule showing the Basic Earnings per Share.

Question b) Analyze each of the convertible debt/equity items of the company and show the effects they have on the earnings per share.

Question c) Prepare the schedule for diluted earnings per share as it would be presented on the year-end financial statements.