All of Air Canada’s financial reports were in millions of Canadian dollars. While reviewing the financial reports, it was noted as of January 1st, 2021 (thus taking the numbers from December 31st, 2020 - year end), the share capital was $2,150. Shares issued in 2020 were $558. Issued and outstanding shares for Share Capital were divided into two classes, Class A and Class B. Class A is variable voting shares, while Class B is voting shares. As of December 31st, 2020 Class A had $111,926,060 issued and outstanding shares and Class B had $220,246,228, for a total of $332,172,288 issued and outstanding shares.

The current market price is $16.41 as of December 2nd, 2021. Basic Earnings per share for 2020 were (16.47), actually showing a deficit. Diluted Earnings per Share for 2020 were also (16.47), once again showing a deficit.

15- Shareholders’ Equity and 17 – Earnings Per Share.

The company intends to raise additional capital to finance an expansion. The expected cost is $20M Canadian dollars. The board is uncertain whether it should issue additional shares or new debt, given the current capital structure. The current lending rate is 10% (assumed). Advise the board on the impact of the two financing options on the company’s current capital structure. In your analysis, show calculations and analysis of the following:

1. The revised number of outstanding shares and the impact this share issue may have on the existing shareholders;

2. The impact of the additional share issuance on the earnings per share;

3. The day 1 journal entry to record the share issuance option;

4. The day 1 journal entry to record the debt option; and

5. The impact on the financial statements (Assume the declaration takes place on July 1 in the financial year.
   a. if the company were to declare a $.01 share dividend at the end of the first financial year,
   b. or the impact of debt option at the end of the first year.