Braga Co. was formed on July 1, 2015. It was authorized to issue 600,000 shares of P10 par value ordinary shares and 200,000 shares of 8% P25 par value, cumulative and non-participating preference shares. Braga Company has a July 1- June 30 fiscal year.

The following information relates to the shareholders equity accounts of Braga Company:

Ordinary Shares

Prior to the 2017-2018 fiscal year, Braga Company had 220,000 of outstanding ordinary shares issued as follows:

190,000 shares were issued for cash on July 1, 2015, at P31 per share.

On July 24, 2015, 10,000 shares were exchanged for a land which cost the seller 140,000 in 2009 and had an estimated market value of P440,000 on July 24, 2015.

20,000 shares were issued on March 1, 2017; the shares had been subscribed for P42 per share on October 31, 2016.

During the 2017-2018 fiscal year, the following transactions regarding ordinary shares took place:

2017

Oct 1 4,000 shares were issued for cash at P46 per share.

Nov.30 Braga purchased 4,000 of its own ordinary shares on the open market at P39 per share.

Dec.15 Braga declared a 5% share dividend for shareholders of record on January 15, 2018, to be issued on January 31, 2018. Samantha was having a liquidity problem and could not afford a cash dividend at that time. Braga's ordinary shares were selling at P52 per share on December 31, 2017.

2018

June 20 Braga sold 1,000 of its own ordinary shares that it had purchased on November 30, 2017, for P42,000.

Preference Shares

BRAGA issued 100,000 preference shares at P44 per share on July 1, 2016.

Cash Dividends

Braga has followed a schedule of declaring cash dividends in December and June with payment being made to shareholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2018, are shown below:

Declaration Date Ordinary shares Preference shares

12/15/2016 P0.30 per share P1.00 per share

6/15/2017 P0.30 per share P1.00 per share

12/15/2017 - P1.00 per share

No cash dividends were declared during June 2018 due to the companys liquidity problems.

Retained Earnings

As of June 30, 2017, Bragas retained earnings account had a balance of P1,380,000. For the fiscal year ending June 30, 2018, Samantha reported net income of P80,000.

In March 2017, Braga received a term loan from NBM National Bank. The bank requires the company to establish a sinking fund and restrict retained earnings for an amount equal to the sinking fund deposit. The annual sinking fund payment of P100,000 is due on April 30 each year; the first payment was made on schedule on April 30, 2018

Question:

1.) Compute the Earnings per Share at June 30, 2018.

2.) The board of director wishes to stimulate interest in Braga Company ordinary shares but does not wish to distribute cash at this time. The board also believes that too many adjustments to the equity section might be discouraging to potential investors. The board has considered 3 options for stimulating interest in the shares:

1. A 20% share dividends.

2. A 100% share dividends.

3. A 2-for-1 share split.

As auditor you were asked as financial advisor to the board, and you have been asked briefly on each option, considering the board wishes, make a recommendation and discussing the effects of each of the foregoing options. Present a formal report to the board.