Reference no: EM132940222

The following information pertains to Shane's Sports Collections Limited (SSCL):The tax rate is 40%.

• SSCL ended 20X5 with 700,000 common shares outstanding, after issuing 200,000 common shares for cash on 31 December.
• There were no other common share transactions during the period.
• Net earnings were $1,300,000.

The following are elements of SSCL's capital structure:

• ASCL had $5,000,000 (par value) of 8% bonds payable outstanding during the year. The bonds are convertible into 80 common shares for each $1,000 bond. Bond interest expense was $403,000 for the year.
• SSCL had 40,000 options outstanding throughout 20X5 to purchase 120,000 common shares for $3 per share. The average share price during the year was $15. The options were not exercisable until 20X10.
• SSCL had 70,000, $1.25 preferred shares outstanding. The shares were cumulative. No dividends were declared in 20X6. The shares were convertible into 50,000 common shares.
• SSCL had a contingent share agreement outstanding to issue 50,000 common shares to the prior shareholders of a company that SSCL had acquired in 20X2. The shares become issuable if the acquired company's operations accumulate $5,000,000 of post-acquisition earnings before the end of 20X8. Earnings have been $3,500,000, to date, and the target is expected to be met in 20X7.
• SSCL had $8,000,000 (par value) of 6% bonds payable, issued on 31 March 20X5. The bonds are convertible into 40 common shares for each $1,000 bond. Bond interest expense was $285,750 for the nine months of the year that the bond was outstanding.

Required:

Question 1: Compute SSCL's basic EPS for 20X5.

Question 2: Compute SSCL's diluted EPS for 20X5.