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Computing basic earnings and diluted earnings per share

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Question 1 - Shell Company has 2,500,000 ordinary shares outstanding on December 31, 2022. An additional 500,000 ordinary shares were issued on April 1, 2023 and 250,000 more on July 1, 2023. On October 1, 2023, Shell Company issued 5,000, P1,000 face value, 7% convertible bonds. Each bond is convertible into 40 ordinary shares. No bonds were converted into ordinary shares 2023.

What is the number of shares to be used in computing basic earnings per share and diluted earnings per share, respectively?

a. 2,875,000 and 2,925,000

b. 2,875,000 and 3,075,000

c. 3,000,000 and 3,200,000

d. 3,000,000 and 3,050,000

Question 2 - IKEA Company had 60,000 ordinary shares outstanding at January 1. On May 1, IKEA Company issued 31,500 ordinary shares. Outstanding all year were 30,000 shares of non-convertible preference shares on which a dividend of P40 per share was paid in December. Profit for the year was P2,901,000.

Basic earnings per share for the year is?

a. P18.60

b. P21.00

c. P28.40

d. P31.70

Reference no: EM133172593

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