c. Calculate Peas Be Mine's diluted earnings per share for 2017.

Problem 2 - Basic and Diluted EPS [25 minutes] 26 marks The net income for Peas Be Mine for the year ended December 31, 2017 was $1,400,000. Peas Be Mine had 30,000 ordinary shares outstanding at the beginning of the year. Peas Be Mine declared and distributed a 3-for-1 stock split on May 1,2017 and issued 40,000 ordinary shares on November 1, 2017. Select details of Peas Be Mine's liabilities and equities are as follows: Bonds A$1,400,000, 11%, 10-year, semi-annual bonds issued on July 1, 2017. At the option of the holder, each $1,000 bond can be converted into 20 ordinary shares at any time before expiry. Bonds B$1,500,000, 9%, semi-annual bonds maturing September 30, 2021. The owners of the bonds elect to convert them into 25,500 ordinary shares on December 1, 2017. 50,000 cumulative preferred shares that are each entitled to dividends of $20.00 per annum. Dividends are not declared in 2017. Peas Be Mine's corporate tax rate was 30%. The recorded conversion factor for the convertible bonds has already been adjusted for the stock split. REQUIRED. Assuming that the effective rate of interest on the bonds equals the coupon rate: a. Calculate Peas Be Mine's basic earnings per share for 2017.(10 marks) b. Prepare a schedule that sets out the income effect, share effect, and incremental EPS for each security that is convertible into ordinary shares. Rank the potential ordinary shares by their dilutiveness. (10 marks) Potential ordinary shares Income effect Share effect Incremental EPS Rank Order How much tax would be reported under the taxes payable method for FY 2018 (3 marks)? FY2016 Income before tax 120,000 Taxable income 85,000 Tax rate 30% FY2017 110,000 95,000 25% FY2018 120,000 105,000 30%