Pharoah Inc. has 1.05 million common shares outstanding as at January 1, 2023. On June 30,...
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Pharoah Inc. has 1.05 million common shares outstanding as at January 1, 2023. On June 30, 2023,4% convertible bonds were converted into 115,000 additional shares. Up to that point, the bonds had paid interest of $285,200 after tax. Net income for the year was $1,295,775. During the year, the company issued the following: 1. 2. June 30: 12,090 call options giving holders the right to purchase shares of the company for $34 September 30: 17,090 put options allowing holders to sell shares of the company for $29 On February 1, Pharoah also purchased in the open market 12,090 call options on its own shares, allowing it to purchase its own shares for $31. Assume the average market price for the shares during the year was $39. Assume further the following: 1. 2. On September 30, 230,000 convertible preferred shares were redeemed. If they had been converted, these shares would have resulted in an additional 115,000 common shares being issued. The shares carried a dividend rate of $3 per share to be paid on September 30. No conversions have ever occurred. There are 11,800 of $1,000, 5% convertible bonds outstanding with a conversion rate of three common shares for each bond starting January 1, 2024. Beginning January 1, 2027, the conversion rate is six common shares for each bond, and beginning January 1, 2031, it is nine common shares for each bond. The tax rate is 30%. Calculate weighted common shares outstanding. Weighted common shares outstanding 1,107,500 690,000 Calculate the income effect of the dividends on preferred shares. Dividends on preferred shares tA Calculate the basic earnings per share under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round answer to 2 decimal places, e.g. 15.25.) Basic EPS $ 0.55 Determine an incremental per share effect for $3 preferred shares. Incremental Numerator Effect 690,000 Incremental Denominator Effect 86,250 +A $ EPS 8 Calculate the after-tax interest paid on the 5% bonds. After-tax interest on bonds converted $ 413,000 Rank the potentially dilutive securities from most dilutive to least dilutive. $3 Preferred shares Anti-dilutive 5% Bonds Anti-dilutive Options Rank 1 Calculate the diluted EPS numbers under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round earnings per share to 2 decimal places, e.g. 15.25.) Basic Call Options Numerator $ 605,775 Denominator 1,107,500 $ 775 $ 605,775 1,108,275 Diluted EPS 0.55 EPS 0.55 to $ 0.55 Show the required presentations on the face of the income statement. (Round answers to 2 decimal places, e.g. 15.25.) PHAROAH INC. Partial Income Statement For the Year Ended December 31, 2023 Earnings Per Common Share: Basic Earnings Per Share Diluted Earnings Per Share +A $ +A 0.55 $ 0.55 Pharoah Inc. has 1.05 million common shares outstanding as at January 1, 2023. On June 30, 2023,4% convertible bonds were converted into 115,000 additional shares. Up to that point, the bonds had paid interest of $285,200 after tax. Net income for the year was $1,295,775. During the year, the company issued the following: 1. 2. June 30: 12,090 call options giving holders the right to purchase shares of the company for $34 September 30: 17,090 put options allowing holders to sell shares of the company for $29 On February 1, Pharoah also purchased in the open market 12,090 call options on its own shares, allowing it to purchase its own shares for $31. Assume the average market price for the shares during the year was $39. Assume further the following: 1. 2. On September 30, 230,000 convertible preferred shares were redeemed. If they had been converted, these shares would have resulted in an additional 115,000 common shares being issued. The shares carried a dividend rate of $3 per share to be paid on September 30. No conversions have ever occurred. There are 11,800 of $1,000, 5% convertible bonds outstanding with a conversion rate of three common shares for each bond starting January 1, 2024. Beginning January 1, 2027, the conversion rate is six common shares for each bond, and beginning January 1, 2031, it is nine common shares for each bond. The tax rate is 30%. Calculate weighted common shares outstanding. Weighted common shares outstanding 1,107,500 690,000 Calculate the income effect of the dividends on preferred shares. Dividends on preferred shares tA Calculate the basic earnings per share under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round answer to 2 decimal places, e.g. 15.25.) Basic EPS $ 0.55 Determine an incremental per share effect for $3 preferred shares. Incremental Numerator Effect 690,000 Incremental Denominator Effect 86,250 +A $ EPS 8 Calculate the after-tax interest paid on the 5% bonds. After-tax interest on bonds converted $ 413,000 Rank the potentially dilutive securities from most dilutive to least dilutive. $3 Preferred shares Anti-dilutive 5% Bonds Anti-dilutive Options Rank 1 Calculate the diluted EPS numbers under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round earnings per share to 2 decimal places, e.g. 15.25.) Basic Call Options Numerator $ 605,775 Denominator 1,107,500 $ 775 $ 605,775 1,108,275 Diluted EPS 0.55 EPS 0.55 to $ 0.55 Show the required presentations on the face of the income statement. (Round answers to 2 decimal places, e.g. 15.25.) PHAROAH INC. Partial Income Statement For the Year Ended December 31, 2023 Earnings Per Common Share: Basic Earnings Per Share Diluted Earnings Per Share +A $ +A 0.55 $ 0.55
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Related Book For
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
Posted Date:
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