Biggar Inc has a December 31, 2014 year end. Biggar calculates its basic EPS as $2.31 per common

share. 2014 tax rate is 40%. Use the information below to do the following (round all amounts to

the nearest whole number):

1. Test each security for dilution for 2014. Show all calculations.

2. After your testing, clearly state if securities are dilutive or anti-dilutive. If the options are

dilutive, include your calculation of new shares issued.

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a) Preferred shares, $3, cumulative: these shares were convertible 5-for-1. At the beginning of

the year (January 1, 2014), 30,900 preferred shares were outstanding and no new shares

were issued during the year. No shares converted to common by the year end. Dividend are

paid annually. (3 marks)

b) Biggar Ltd. has $3,030,000 par value convertible bonds outstanding at December 31, 2014.

The bonds were issued on March 1, 2014. The bonds are convertible into 50,600 common

shares. Interest expense on the bond from March 1, 2014 to December 31, 2014 is $199,000.

The bonds are convertible at any time before their maturity date in 2020. (4 marks)

c) Options allowing the purchase of 5,000 common shares at $14 per share were outstanding

all year. The average market price of the shares during the year was $17 per share. (3

marks)