Assume that you are a member of the financial accounting team responsible for preparing Apex Limiteds financial
Question:
Assume that you are a member of the financial accounting team responsible for preparing Apex Limited’s financial statements for the year ended 30 June 2019. Mr. John Bradshaw, head of the financial accounting team, has asked you to calculate the basic EPS and Diluted EPS. John provided you the following information:
• Apex Limited’s reported earnings for the year ended is $28,500,000 and weighted average number of ordinary equity shares are: 22,800,000.
• Other than ordinary equity shares, as at 30 June 2019, Apex Limited issued the following other equity instruments:
o $4,000,000 convertible debentures, which paid interest at 7% and are convertible to one ordinary share per $1 of debenture.
o 500,000 share options convertible to one ordinary share per option, with an exercise price of $5.
o 2,000,000 convertible preference shares of $1 each. Holders of these shares are entitled to receive dividend at 12% and they are also entitled to convert into ordinary equity shares at a ratio of 25:1, at the option of the preference shareholders.
o On 1 January 2019, Apex Limited acquired the business of P&Q Limited, a smaller competitor of Apex Limited. Part of the acquisition price comprised 400,000 ordinary shares, contingent on P&Q Limited’s earning a profit before tax of $900,000 for the year to 31 December 2019. For the 6 months to 30 June 2019, P&Q Limited earned a profit before tax of $1,000,000.
• The average share price of Apex Limited shares for the year ended 30 June 2019 was $6.60. Tax rate is 30%. Required: Calculate the basic EPS and the diluted EPS for Apex Limited for the year ended 30 June 2019 (ignore any tax effects).
Required:
Calculate the basic EPS and the diluted EPS for Apex Limited for the year ended 30 June 2019 (ignore any tax effects).
