On 1 January 2005, BELLS plc (BELLS) had 1,000,000 €1 ordinary shares and 500,000 6% €1 convertible preference shares in issue. Preference dividends are paid half yearly on 31 March and 30 September each year. BELLS’ profit after tax for the year ended 31 December 2005 was: 

On 1 April 2005, BELLS issued a further 500,000 €1 ordinary shares at full market price. Warrants to purchase 450,000 €1 ordinary shares were issued on 31 May 2005 at €3 per share. While the warrants were due to expire on 31 May 2009, all were exercised on 28 February 2006. Convertible loan stock of €800,000 at an interest rate of 6% per annum was issued at par on 30 June 2004. Each €100 of loan stock is convertible into 10 €1 ordinary shares at any time at the option of the holder. Interest is paid half yearly on 31 December and 30 June each year. On 1 July 2005, €300,000 of loan stock was converted when the market price was €4 per share. The preference shares are convertible into ordinary shares at the option of the holder on the basis of one €1 ordinary share for every four convertible preference shares held. Holders of 200,000 preference shares converted them into ordinary shares on 1 October 2005. The average market price of BELLS’ ordinary shares during the year ended 31 December 2005 was €5 per share, and the tax rate is 25%.
BELLS’ financial statements were approved on 31 March 2006.
Requirement Calculate the basic and diluted EPS‘for BELLS for the year ended 31 December 2005 in accordance with IAS 33 Earnings per share.
REFERENCES Healy, P. M. and Wahlen, J. M. (1999). ‘A Review of the Earnings Management Literature and its Implications for Standard Setting’, Accounting Horizons, Vol. 13, No. 4, pp.365—383.

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Profit after tax: Continuing operations Discontinued operations '000 3,000 500 3,500