Reference no: EM132926058

Question -

Part I - On January 1, 2019 Windsor Inc. had 570,000 common shares outstanding. During the year it had the following transactions that affected the common shares account:

Mar. 1 Issued 300,000 common shares for cash.

Apr. 1 Issued a 20% stock dividend.

July 1 Acquired and cancelled 200,000 common shares for cash.

Nov. 1 Issued 48,000 common shares for cash.

The public company has a December 31year end and is planning to issue its audited 2019 financial statements on February 25, 2020. On January 31, 2020 the company split the common shares 2 for 1 to reduce the market price to a more favourable level.

Windsor's net income for 2019 was $3.5 million and dividends of $400,000 were declared and paid for the current year including a dividend in arrears of $200,000 on the cumulative preferred shares.

NOTE: Earnings per share should be calculated to 4 decimal places.

Required -

a) Calculate the weighted average number of common shares outstanding as at December 31, 2019 for the purpose of calculating Basic EPS.

b) Calculate the basic earnings per share as at December 31, 2019 for the.

Part II - Hespler Corp. had the following capital structure at January 1, 2019.

8% bonds payable, $1,000 face value, convertible into

8 common shares each $4,000,000

10% bonds payable convertible into 12 common shares for each $1,000 face value $5,000,000

$5 Class A cumulative preferred shares, no par value, convertible into 1 common share each, 10,000 shares outstanding $3,000,000

$3 Class B preferred shares, no par value, 50,000 shares outstanding $6,000,000

Common shares, no par value, 200,000 share outstanding $3,000,000

Series A: 10,000 employee stock options were outstanding, each option allowing the employee to acquire one common share at $50, vesting December 31, 2020.

Series B: 30,000 employee stock options were outstanding, each option allowing the employee to acquire one common share at $90, vesting December 31, 2021

On July 2, 2019, 1/2 of the 10% bond was converted into common shares. No other instruments were converted or issued during 2019. Net income for 2019 was $1,200,000 and the company's tax rate was 25%. The company declared and paid preferred share dividends amounting to $250,000 which included 1 year of dividends in arrears. The average market price of the company's common shares for 2019 was $80.

Required - Calculate and present the EPS figures (to four decimal places) which must be disclosed in accordance with GAAP on the company's financial statements for fiscal 2019. Show all calculations. For the calculation of diluted earnings per share assume basic earnings per share is 5.8000 (Income available to the common shareholders is 580,000 and weighted average shares is 100,000).