EARNINGS PER SHARE:

A. During 2020, Best Corporation had the following two classes of share capital issued and
outstanding for the entire year:
 200,000 ordinary shares, P1 par
 2,000 of 4% cumulative preference shares. P100. Par convertible share for a share into
ordinary share.

Best’s 2020 profit before tax was P1,800,000 and its income tax rate for the year was 30%.

Required:

a. Basic earnings per share

b. Diluted earnings per share
c. Assume that dividend rate on the preference share was 12% instead of 4%, what are the
basic and diluted earnings per share.

B. Computation of weighted average number of shares

The transactions involving the ordinary shares account of Faith Company during the two-year
period 2019 and 2020 were as follows:

2019:
Jan 1 200,000 shares of P10 par were outstanding. Options to purchase 7,000 shares for P20 a
share were likewise outstanding.
April 1 P2,500,000 of convertible bonds were converted with 50 shares for each P1,000 bond
July 1 A 10% bonus issue was declared.
Oct. 1 option to purchase 7,000 shares for P20 a share were exercised.
2020
Apr.1 A 2 for 1 share split was declared
Oct. 1 80,000 shares were sold for P30 per share
Required:
Compute the weighted average number of shares to be used in the calculation of basic earnings
and diluted earnings per share for the company’s comparative statements for years 2019 and
2020.
C. The controller of LetGoo Company is currently preparing the calculation for basic earnings and
diluted earnings. Below is selected financial information for the fiscal year ended June 30, 2020
LetGoo Company
Selected Statement of Financial Position Information
June 30, 2020
Long-term debt:
Notes payable 10% p 1,000,000.
7% convertible bonds payable 5,000,000
10% bonds payable 6,000,000
Long-term debt 12,000,000

Shareholders’ Equity
Preference share, 8.5% cumulative , P50 par, 100,000 shares
Authorized, 25,000 shares issued and outstanding 1,250,000
Ordinary share,P1 par, 10,000,000 shares authorized
1,000,000 shares issued and outstanding 1,000,000
Share premium 4,000,000
Retained earnings 6,000,000
12,250,000
The following transactions have also occurred at LetGoo:
1. Options were granted in 2019 to purchase 100,000 shares at P15 per share. Although no
options were exercised 2020, average price per ordinary share during fiscal year 2020
was P20 per share.
2. Each bond was issued at face value. The 7% convertible bonds will convert into ordinary
share at 50 shares per P1,000 bond.
3. Each 8.5% preference shares is convertible into 10 ordinary shares
4. There are no preference shares dividend in arrears; however preference share dividend
were not declared in the fiscal year 2020.
5. The 1,000,000 ordinary shares were outstanding for the entire fiscal year.
6. The profit for fiscal year ended June 30, 2020 was P1,500,000 and the income tax rate
is 30%.

Required:

For the fiscal year 2020, calculate LetGoo Company’s (a) basic earnings per share (b) diluted
earnings per share.