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SECTION B $-20$ marks each

Answer any two $(2)$ questions from this section

Question $12-20$ marks

On January $1,2022,$ Tetley Incorporated had $240,000$ ordinary shares outstanding. During $2022,$ it had the following transactions that affected the ordinary share account. Ordinary shares had a $$40$ par value.

$\backslash$table$[[$February $1,$Issued $60,000$ shares$],[$March $1,$Issued a $20\%$ share dividend$],[$May $1,$Acquired $30,000$ treasury shares$],[$June $1,$Issued a $2-$for$-1$ share split$],[$October $1,$Reissued $30,000$ treasury shares$]]$

The information below also pertains to Tetley for $2022$;

Net income for the year was $$2,400,000.$

Tetley had $$4,000,000$ in $8\%$ convertible bonds issued at par $($ $$1,000$ per bond$)$; each bond is convertible into $60$ shares of ordinary shares; the liability component of the bonds is $$3,600,000$ based on a market rate of $9\%.$

Tetley also had $$8,000,000$ in $6\%$ convertible, cumulative preference shares, $$200$ par value; each share is convertible into $6$ shares of ordinary shares.

The company's tax rate for $2022$ is $40\%.$

The average market price of ordinary shares is $$50$ per share.

The company has ordinary share options $($granted in a prior year$)$ to purchase $150,000$ ordinary shares at $$40$ per share.

There were no changes during $2022$ in the number of preference shares, or convertible bonds outstanding.

Required:

a$.$ Determine the weighted$-$average ordinary shares outstanding for $2022.$

$(6$ marks$)$

b$.$ Compute basic earnings per share for $2022.$

$(4$ marks$)$

c$.$ Compute diluted earnings per share for $2022.$

$(7$ marks$)$

d$.$ Identify and briefly explain the type of capital structure Tetley is considered to have.

$(3$ marks$)$