Earnings per share Tom Ltd is a company that was hurt by a major downturn in the economy due to Covid-19 in 2020 that significantly threatens the financial stability of the company. Tom Ltd in order to survive in this critical situation decides to restructure its strategy for forthcoming years. Changes in company strategies and accounting policies have a significant impact on reported profit. The basic earnings per share and diluted earnings per share presented in the company's current year financial statements in accordance with "AASB 133 Earnings per Share" were comparatively higher than that of the last year. In contrast, company share prices had dropped by 12% at the reporting date, according to the Financial Review. The CEO of Tom Ltd is not sure how to calculate and include basic and diluted earnings per share in the company's financial statements in accordance with AASB 133, and called for a report from the finance manager of the company. On 30 June 2020, Tom Ltd had the following equity: Preference shares (issued at $ 5 each) Ordinary shares (issued at $ 4 each) Retained earnings Reserves Total equity 200 000 shares $ 4 000 000 $ 950 000 $ 330 000 $ 6 280 000 During the year ended 30 June 2020, the company earned an after tax profit of $1 280 000 from ordinary activities, During the year ended 30 June 2020, the company earned an after tax profit of $1 280 000 from ordinary activities. The additional information is available. i. On 20 November 2019, the company made a one-for-five bonus issue, and on 30 March 2020, the company made a rights issue of 400 000 ordinary shares. ii. On 20 July 2017, the company issued $ 750 000 of 8% convertible notes. Each $ 100 note was convertible into 50 ordinary shares. There was no conversion during the year ended 30 June 2020. ill. On 28 February 2019, the company issued options to purchase 10 000 shares at $ 3.50 each. No options were exercised during the year ended 30 June 2020. The company income tax rate is $ 0.30 in the dollar and the company's ordinary shares are trading at $5 per share on 30 June 2020. The company paid preference dividends of $ 80 000. iv. V. 2. Distinguish between basic and diluted earnings per share. (4 Marks) 3. Following the requirements of AASB 133: Calculate basic earnings per share. (8 Marks) 4. Following the requirements of AASB 133: Calculate diluted earnings per share. (8 Marks) End of Final Assessment