Agassi AG is preparing the comparative financial statements to be included in the annual report to shareholders.
Question:
Income before income tax for Agassi was €1,400,000 and €660,000, respectively, for fiscal years ended May 31, 2020 and 2019. Agassi experienced a loss from discontinued operations of €400,000 in March 2020. A 40% combined income tax rate pertains to any and all of Agassi AG profits, gains, and losses.
Agassi's capital structure consists of preference shares and ordinary shares. The company has not issued any convertible securities or warrants, and there are no outstanding share options.
Agassi issued 40,000 shares of €100 par value, 6% cumulative preference shares in 2016. All of these shares are outstanding, and no preference dividends are in arrears.
There were 1,000,000 shares of €1 par ordinary shares outstanding on June 1, 2018. On September 1, 2019, Agassi sold an additional 400,000 ordinary shares at €17 per share. Agassi distributed a 20% share dividend on the ordinary shares outstanding on December 1, 2019. These were the only ordinary share transactions during the past 2 fiscal years.
Instructions
a. Determine the weighted-average number of ordinary shares that would be used in computing earnings per share on the current comparative income statement for:
1. The year ended May 31, 2019.
2. The year ended May 31, 2020.
b. Starting with income before income tax, prepare a comparative income statement for the years ended May 31, 2020 and 2019. The statement will be part of Agassi AG annual report to shareholders and should include appropriate earnings per share presentation.
c. The capital structure of a company is the result of its past financing decisions. Furthermore, the earnings per share data presented on a company's financial statements is dependent upon the capital structure.
1. Explain why Agassi AG is considered to have a simple capital structure.
2. Describe how earnings per share data would be presented for a company that has a complex capital structure.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Step by Step Answer:
a WeightedAverage Shares Before Share Dividend After Share Dividend Total as of June 1 2018 1000000 ...View the full answer
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Related Book For 
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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