Question

Sunland Inc. has 1.10 million common shares outstanding as at January 1, 2020. On June 30, 2020, 4% convertible bonds were converted into 95,000 additional shares. Up to that point, the bonds had paid interest of $225,000 after tax. Net income for the year was $1,298,572. During the year, the company issued the following:

1.		June 30:		13,260 call options giving holders the right to purchase shares of the company for $34
2.		Sept. 30:		18,260 put options allowing holders to sell shares of the company for $29

On February 1, Sunland also purchased in the open market 13,260 call options on its own shares, allowing it to purchase its own shares for $31. Assume the average market price for the shares during the year was $39.

Calculate the required EPS numbers under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round answers to 2 decimal places, e.g. 15.25.)

Basic EPS		$
Diluted EPS		$

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Show the required presentations on the face of the income statement. (Round answers to 2 decimal places, e.g. 15.25.)

Sunland Inc. Partial Income Statement                                                                       December 31, 2020For the Year Ended December 31, 2020For the Month Ended December 31, 2020
Earnings Per Common Share:
Basic Earnings Per Share		$
Diluted Earnings Per Share		$

Answer 1

Caluclation of Basic Earning per share and Diluted Earning per share;

Calucaltion of No of shares outstanding for Basic EPS caluclation;

No of shares outstanding on 01-01-2020 = 11,00,000

Additional shares issued on 01-06-2020 = 95,000

Basic EPS = Net income / Weighted avg no of shares

Caluclation of Weighted avg no of shares:Note: Treasury share s are considered as company's holding there fore the shares will not be considered in dividend distribution and EPS caluclation

  

	A	B	A*B
Particulars	No of shares	Weights	Weighted avg shares
No of shares as on 01st Jan	11,00,000	=12/12=1	11,00,000
No of shares issued on 01st June	95,000	=7/12=0.58	55,100
			11,55,100

Basic EPS Caluclation;

	Particulars	Amount( In $)
I	Net income	12,98,572
II	Less: Preference Dividend	0
III	Earnings available for shareholders	12,98,572	(I-II)
IV	Wighted avg shares	11,55,100
V	Basic EPS	1.124	(III/IV)

Caluclation of Diluted EPS;

Diluted EPS = Net income - Preference Divdend / (Weighted avg no of shares + Diluted shares)
Caluclation of Diluted shares ( In money options);

caluclation stock option shares;

June-30 Call options;

Value of options in current shares = Amount paid to exercise shares /  Current share price

= 13260*34  / 39

= 11,560

Diluted shares = Options issued - Value of option in current shares

= 13,260 - 11,560

= 1700

Total diluted shares =1700 shares

Diluted EPS = Net income - Preference dividend / Weigted average shares+ no of diluted shares

= $ 12,98,527 / (11,55,100+1700)

= $ 12,98,527 / 11,56,800

= $ 1.122 per share

Answer:

Basic EPS = $ 1.124

Diluted EPS $ 1.122