On June 1, 2018, Bluhm Company and Amanar Company merged to form Davenport SA. A total of 800,000 shares were issued to complete the merger. The new company reports on a calendar-year basis.
On April 1, 2020, the company issued an additional 600,000 shares for cash. All 1,400,000 shares were outstanding on December 31, 2020.
Davenport SA also issued €600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each €1,000 bond converts to 40 ordinary shares at any interest date. None of the bonds have been converted to date. The interest expense on the liability component of convertible bonds for 2020 was €30,000.
Davenport SA is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of €1,540,000. (The tax rate is 40%.)
Instructions
Determine the following for 2020.
a. The number of shares to be used for calculating:
1. Basic earnings per share.
2. Diluted earnings per share.
b. The earnings figures to be used for calculating:
1. Basic earnings per share.
2. Diluted earnings per share.