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1. In 2019, the creditors and shareholders had the following claims from Hapia Company:
14% effective rate, convertible bonds payable issued at P6,000,000 face value due in 5 years
P40,000,000, P90 par 8% cumulative preference shares
P12,000,000, P80 par 10% noncumulative preference shares
P24,000,000, P50 par ordinary shares
Additional Information:
1. The company uses the calendar year as the accounting period.
2. The convertible bonds payable issued on January 1, 2019 are
convertible into 120,000 ordinary shares and has a nominal rate of 10%.
3. The convertible bonds payable is converted on July 31, 2019.
4. The company reported P12,000,000 Profit for the year ended December 31, 2019.
Income tax rate is 30%.
Requirement:
a. Compute for the basic earnings per share
b. Compute for the diluted earnings per share
Solutions:
a. 12,000,000 – 3,200,000* / 480,000 = 18.33
b. 12,000,000 – 3,200,000 + 295,898* / 480,000 + 120,000 = 15.15
One year preference dividend for cumulative preference shares 40,000,000 * 8% = 3,200,000
Interest expense net of tax, PV @14%, n=5 of P6000,000 = 5,176,060 * 14% * 7/12 * 70% = 295, 898
2. In 2019, the Advertising Computer Enterprise reported P4,500,000 profit in its income statement.
Also, the company declared property dividends worth P500,000 to ordinary shareholders. Its earnings
included P2,000,000 loss on sale of equipment. The company’s shareholders’ equity had shares in its
notes for the year ended December 31, 2019 below:
Additional Information:
1. The company uses the calendar year as the accounting period.
2. The company has P3,000,000 12% convertible bonds payable issued on July 1, 2019
and convertible into ordinary share for every P30 bond.
Requirement:
a. Compute for basic earnings per share.
b. Compute for the diluted earnings per share.
Solutions:
3. In 2019, the creditors and shareholders had the following claims from Hapia Company:
12% effective rate, convertible bonds payable issued at P9,000,000 face value due in 3 years
P30,000,000, P60 par 6% cumulative preference shares
P15,000,000, P40 par 8% noncumulative preference shares
The company’s shareholders’ equity had shares in its notes for the year ended December 31, 2019
below:
Additional Information:
1. The company uses the calendar year as the accounting period.
2. The convertible bonds payable issued on March 1, 2019 are
convertible into ordinary share for every P60 bond and has a nominal rate of 7%.
3. The company reported P8,000,000 Profit for the year ended December 31, 2019.
Income tax rate is 30%.
4. The company declared dividends on noncumulative preference shares amounting to 900,000
Requirement:
a. Compute for the basic earnings per share
b. Compute for the diluted earnings per share
*P9,000,000 / 60 = 150,000
*Interest expense net of tax, PV @12%, n=3 of P9,000,000 = 7,919,175 * 12% * 9/12 * 70% = 498,908