Reference no: EM133185505

Question - On 30 June 2019, Harris Ltd had the following balances in its equity accounts:

Ordinary shares (issued at $2 each) 12,000,000 credit

Preference shares (issued at $1 each) 6,000,000 credit

Retained earnings 9,000,000 credit

Additional information is as follows:

On 31 December 2016, the company issued 200,000 options to purchase ordinary shares. Each option entitles the holder to purchase 5 ordinary shares at $2.60 each. No options have been exercised by 30 June 2019.

On 1 September 2017, the company had issued $1,600,000 of 4% convertible notes. Each $100 note was convertible into 70 ordinary shares at the holder's option. No conversions have occurred by 30 June 2019.

During the year ending 30 June 2019, Harris Ltd declared and paid a dividend to preference shareholders of $160,000.

The preference shares are convertible into 120,000 ordinary shares at the discretion of the preference shareholders.

During the year ending 30 June 2019, Harris Ltd had a net profit after tax of $4,000,000.

During the year ending 30 June 2019, the average market price of the ordinary shares is $3.20 per share.

Harris Ltd's income tax rate is 30%.

Required -

(a) Following the requirements of AASB 133 Earnings Per Share, calculate Harris Ltd's basic earnings per share for the year ending 30 June 2019.

(b) Following the requirements of AASB 133 Earnings Per Share, calculate Harris Ltd's diluted earnings per share for the year ending 30 June 2019.

(c) Discuss how the price-earnings ratio may be used in arguments against the mandatory disclosure of Earnings Per Share in published financial reports.