Reference no: EM13334982

Probelm [1] TaylorT Limited's statement of financial position at 31 December 20X2 reported the following:

Further:

a. During 20X2, 27,000 Class A shares were issued at $50 on 1 July. Dividends were declared and paid semi-annually, on 31 May and 30 November.
b. Common share options are outstanding, entitling holders to acquire 650,000 Class B shares at $10 per share.
c. Interest expense on the convertible bonds was $538,000 in 20X2.
d. Income tax rate is 30%.
e. Class B share price average for the year was $13.
f. The net loss, after tax, for 20X2 was $465,000.

Compute the EPS amount(s) that TaylorT should report for 20X2.

Probelm [2] On 1 January 20X1, Delvon AC Services Ltd entered into an agreement to purchase Moore Fuels Limited. The agreement included the following terms:

1. Aker agreed to issue an additional 2,246,000 shares to the prior shareholders of Moore if Aker retained 70% of the customers of Moore at the end of 20X3.
2. Aker agreed to issue 1,464,000 common shares to the prior shareholders of Moore if five key employees remained with Aker through the end of 20X5.
3. Aker agreed to issue an additional 582,000 shares to the prior shareholders of Moore if four new retail fuel units were opened before the end of 20X4.

Aker had 11,910,000 common shares outstanding at the beginning of 20X2. Net earnings were 2,115,400 in 20X2. To date, customer retention was in the range of 65%, and the key employees have remained in Aker's employment. Three new retail outlets were opened in 20X1, and one in early February 20X2. Accordingly, 582,000 common shares were issued to the prior shareholders of Moore, but not until 31 August 20X2. Aker had no other share transactions in 20X2.

Calculate basic and diluted earnings per share figures for 20X2.

Problem [3]

Jim Company has reported basic earnings per Class A common share of $2.78. Jim has a tax rate of 40%. The average share price during the year was $24. Review each of the following items:

A. Class B non-voting cumulative $1 shares, 79,000 shares outstanding all year, convertible into Class A shares at the rate of four Class B shares for one Class A share. Dividends of $0.5 were declared this year and basic EPS properly reflects the dividend entitlement of these preferred shares.

B. Class A common stock options outstanding all year for 34,800 shares at a price of $47.

C. Class A common stock options outstanding all year for 34,800 shares at a price of $20.

D. Class A common stock options granted at the end of the fiscal year for 18,000 shares at $14 per share.

E. 11%, eight-year $5,400,000 convertible bonds outstanding all year, convertible into 17 Class A common shares for every $1,000 bond. A bond discount was recorded when the bond was originally issued and amortization of $47,750 was recorded on the discount this year. On issuance, $460,000 of common stock conversion rights were recorded in shareholders' equity.

F. 7%, 15-year, $9,800,000 convertible bonds outstanding all year, convertible into 24 Class A common shares for every $1,000 bond. A bond discount was recorded on issuance, and amortization of $21,200 was recorded on the discount this year. On issuance, $157,000 of common stock conversion rights were recorded in shareholders' equity.

G. 5%, 15-year, $9,800,000 convertible bonds outstanding at the beginning of the year, convertible into 20 Class A common shares for every $1,000 bond. A bond discount was recorded when the bond was originally issued, and amortization of $2,900 was recorded on the discount this year. On issuance, $157,000 of common stock conversion rights were recorded in shareholders' equity. The bonds converted into common stock on 1 April of the current year, and basic EPS properly reflects the common shares outstanding since 1 April.

Indicate whether each of the above items would be included or excluded in a calculation of diluted EPS. The solution should include the individual effect of each item, as applicable. Indicate the change to the numerator and denominator. (Round individual effect to 2 decimal places and other answers to the nearest dollar amount. Leave no cells blank - be certain to enter "0" wherever required. Omit the "tiny_mce_markerquot; sign in your response.)

Item Numerator Denominator Individual effect
A Included or Excluded? $ $
B Included or Excluded? $ $
C Included or Excluded? $ $
D Included or Excluded? $ $
E Included or Excluded? $ $
F Included or Excluded? $ $
G Included or Excluded? $ $