Exam 5: Earnings Per Share

Since,the objective of reporting diluted EPS is to provide the lowest possible EPS figure,we include all dilutive POS but exclude any antidilutive POS.What are the four steps in the process to separate dilutive from antidilutive POS and to calculate diluted EPS?

Tropical Island Inc.(TIl)was incorporated on January 1,2018.At that time it issued 300,000 ordinary shares; 10,000,$10,8% preferred shares "A"; and 100,000,$10,9% preferred shares "B." Net income for the year ended December 31,2018 was $1,600,000.TIl declares and pays a total of $68,000 in dividends.Both the preferred shares series A and B are non-cumulative in nature.Series A must be fully paid their current entitlement before any monies are paid to the Series B shareholders. Required: Compute basic BPS.

Summer Surprise Ltd.(SSL)was incorporated on January 1,2018.At that time,it issued 210,000 ordinary shares; 95,000,$65,2% preferred shares "A"; and 85,000,$65,4% preferred shares "B." Net income for the year ended December 31,2018 was $500,000.SSL neither declares nor pays dividends during the year.The series A preferred shares are cumulative and the series B preferred shares are non-cumulative.Series A must be fully paid their current entitlement before any monies are paid to the Series B shareholders. Required: Compute basic BPS.

In 2017,TC Mulch Inc.'s net income was $200,000.Mulch had 220,000 ordinary shares outstanding at year end.There were two ordinary share transactions during the year: i)Mulch declared and distributed a 4-for-1 stock split on March 1,2017; and ii)Option C was exercised on April 1,2017.Details of Mulch's stock option plans follow: • Option A entitles employees to purchase 40,000 ordinary shares for $9.00 each.This option was granted during 2016 and expires in 2019. • Option B entitles employees to purchase 40,000 ordinary shares for $21.00 each.This option was granted on July 1,2017 and expires in 2020. • Option C entitles employees to purchase 40,000 ordinary shares for $13.00 each.This option was granted during 2015 and was exercised on April 1,2017. • Option D entitles employees to purchase 40,000 ordinary shares for $17.00 each.This option was granted on September 1,2017 and expires in 2020. The average market price of Mulch's ordinary shares for the year is $18.00.Mulch does not have any preferred shares or convertible bonds outstanding.The recorded exercise prices and number of shares that can be acquired under the stock option plans have already been adjusted for the stock split. Required: a.Calculate Mulch's basic earnings per share for the year ended December 31,2017. b.Calculate Mulch's diluted earnings per share for the year ended December 31,2017.

Explain why other comprehensive income is excluded from the numerator of the EPS calculation.

Explain why the IASB requires the disclosure of basic and diluted EPS.

Which statement is correct?

Which statement is correct?

During 2015,Furry Kittens Inc.(FKI)had three series of employee stock options outstanding,details of which follow: • Options A entitle employees to purchase 60,000 ordinary shares for $58.00 each.This series of options was granted on February 1,2013 and expires on June 30,2015. • Options B entitle employees to purchase 10,000 ordinary shares for $62.00 each until December 31,2016 and $59.00 thereafter.This series of options was granted on June 1,2012 and expires on December 31,2019. • Options C entitle employees to purchase 45,000 ordinary shares for $57.00 each.This series of options was granted on April 1,2015 and expires on December 31,2018. The average market price of FKI's ordinary shares for the year ended December 31,2015 was $60.00. Required: a.For each of the options series,indicate whether they are dilutive or anti-dilutive in nature in 2015 and provide the reason why. b.For each of the options series that are dilutive,determine the number of incremental shares to be notionally issued.

What is the meaning of "weighted average number of ordinary shares outstanding"?

Calculate the share effect on the incremental EPS for the following instrument:

Which statement is correct?

Which statement is correct about the "net income attributable to ordinary shareholders"?