Reference no: EM132901235
The Mango Company started operations way back in the Year 2000. The entity's capital structure consistently consisted of 100,000, P25 par ordinary shares until the end of 2020. Other relevant information follow:
- Towards the end of 2020, the company issued stock options to purchase 5,000 ordinary shares at P40 per share. At the time the options were issued, the market price per share was P48. The average market price per share during 2021 was P50. None of the options were exercised in 2021.
- On April 1, 2021, Mango Company issued for cash 10,000 shares of P100 par, 10% cumulative preference shares. Each preference share is convertible into two ordinary shares.
- 8% bonds with face amount of P2,500,000 are outstanding throughout the year 2021. Each 5,000 bond is convertible into 100 ordinary shares.
- Profit for 2021 amounted to P2,750,000
- Income tax rate is 30%.
- All potential ordinary shares are dilutive in nature.
Problem 1: What is the basic earnings per share for 2021?
Problem 2: What is the diluted earnings per share for 2021?
Problem 3: What if in the above, ¼ of the bonds were converted on July 1, 2021, but the other potential ordinary shares (options and convertible preference shares ) are still outstanding at December 31, what is the diluted earnings per share?
Problem 4: In relation to Q3, what is the weighted average no of ordinary shares outstanding that should be used for diluted earnings per share calculation?
Problem 5: What if in the above, the preference shares were converted to ordinary shares on October 1, 2021, but the other potential ordinary shares (options and convertible bonds) are still outstanding at December 31, what is the diluted earnings per share?
Problem 6: In relation to Q5, what is the weighted average no of ordinary shares outstanding that should be used for diluted earnings per share calculation?
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