Reference no: EM132969021

Question - Apple & Banana (A&B) engages in the retail of electronic products in the city. Its year end is 31 December. It had 200,000 ordinary shares outstanding on 1 January 2020. On 1 April 2020, it issued one bonus share for every four ordinary shares held. On 1 June 2020, it issued one right for every five ordinary shares held. The rights could be exercised at $5 per right on that day. All rights were exercised. The share price of A&B immediately prior to the exercise was $8 per share.

As at 31 December 2020, A&B had the following financial instruments outstanding.

(a) 2,000,000 cumulative 5% preference shares issued at $1 each.

(b) 40,000 share options. Each option could be exchanged for four ordinary shares at exercise price per share of $10. The average share price of A&B for the year ended 31 December 2020 was $12 per share.

(c) $500,000 10% convertible bonds issued when the market interest rate was 12% for a similar non-convertible bond. Interest was paid annually on 31 December. On 1 January 2020, the liability component of the convertible bond was $483,100. Each $1,000 bond could be converted into three ordinary shares at the time of conversion.

All the above instruments were outstanding prior to 1 January 2020.

The profit after tax available for dividends for A&B is $1,500,000 for the year ended 31 December 2020. The tax rate is 20%.

Required - Calculate the basic and diluted earnings per share for A&B for 2020 under HKAS 33 Earnings Per Share.