30.00 Time Lell 2 27.12 Part 2 (17 marks = 25 minutes) 3 Brad Flynn is the Controller of Blossom Inc. He is currently preparing the calculation for basic and diluted earnings per share. The following has been extracted from the Company's balance sheet as at December 31, 2019. 6 Long Term Debt 9% convertible bonds $6.000.000 10% bonds payable 8,000,000 8 Shareholders'Equity $8 Class A preferred shares, cumulative and convertible, 400,000 shares authorized 100,000 shares issued and outstanding: $2,000,000 3: $4 Class B non-cumulative preferred shares, 1,000,000 shares authorized, 300,000 issued and outstanding: 4,000,000 se 4: Common shares, unlimited number of shares authorized and 1,600,000 shares issued and outstanding: 8,000,000 13,000,000 utions took place: paid $4 Class B non-cumul issued and outstanding: 4,000,000 3 Common shares, unlimited number of shares authorized and 1,600,000 shares issued and outstanding: 8,000,000 6 Retained earnings: 13,000,000 During 2020/2021 the following transactions took place: January 31, 2020: Preferred dividends totaling $2,800,000 were paid March 31, 2020: 200,000 common shares were issued for $9.00 per share June 30, 2020: One-half of the convertible bonds are converted into common shares (after the payment of semi-annual interest) Sept. 30, 2020: The company purchases 500,000 common shares in the open market for $15 per share 4: Dec. 31. 2020: Net income for the year is $3,850,000 February 15, 2021: The company splits its stock 2:1 Additional information: the following stock options outstanding January 1, 2020: 2 3 February 15, 2021: The compally - Additional information: 5 6 The company has the following stock options outstanding January 1, 2020: (Granted in June 2017, 250,000 options with an exercise price of $10 vesting June 30,2022; Granted in Sept. 2018, 100,000 options with an exercise price of $15 vesting September 30, 2023) ge 2: Prior to the January 31, 2020 dividend the last dividend paid on January 31, 2018. 8 7 The Class A preferred shares are convertible into 10 common shares for each preferred share Page 3 The convertible bonds were issued at face value and pay interest semi-annually. The bonds are convertible into 50 common shares per $1,000 face value bond. . During 2020 no options were exercised; average common share price was $12 Page 4: The company's corporate tax rate is 40%; the company's year-end is December 31, with financial statements issued on March 31 of the following year. 10 REQUIRED (Note: All Answers should be Calculated to 3 Decimal Places for example $12.336 per share) 1: . Prior to the January 31, 2020 dividend, the last dividend palu 2. 3 The Class A preferred shares are convertible into 10 common shares for each preferred share 5 The convertible bonds were issued at face value and pay interest semi-annually. The bonds are convertible into 50 common shares per $1,000 face value bond. During 2020 no options were exercised; average common share price was $12 2 age 2 The company's corporate tax rate is 40%; the company's year-end is December 31, with financial statements issued on March 31 of the following year. 8 7 REQUIRED (Note: All Answers Should be Calculated to 3 Decimal Places, for example $12.336 per share) Page 3: 9 Question 7 17 points) Calculate basic earnings per share for the year ended December 31, 2020.. Page 4: 10 3 6 Question 8 (10 points) Ignore the results of part (1). Assume basic earnings per share is $1.00 (income available to common shareholders $2,000,000 and weighted average shares outstanding 2,000,000) . Calculate diluted earnings per share for the year ended December 31, 2020. 4