June Company had $800,000 net income in 2023. On 1 January 2023, there were 400,000 ordinary shares outstanding. On 1 April, 10,000 shares were issued and on 1 May, the company issued 5% bonus issue on ordinary shares. 30,000 treasury shares were repurchased from the open market at $35 on I September.

On 1 March 2023, the company issued 200,000 9%, noncumulative and nonconvertible preference shares (at SI par value).

June Company issued $1,000,000 of 8% convertible bonds at face value during 2022. Each $1,000 bond is convertible into 50 ordinary shares. Top executives were granted 100,000 options to buy ordinary shares at $30 if the net income is over $300,000. The beginning and ending market price of the ordinary shares was $46 and $54 respectively during the year 2023.

At the financial year-end, dividends on preference shares are declared and paid. In addition, the company declared and paid $5 cash dividends to all ordinary shareholders. Assume the tax rate for 2023 is 40%.

Required: (Note: answers must be rounded to two decimal places)

a) Calculate the basic earnings per share for 2023.

(9 marks)

b) Calculate the diluted earnings per share for 2023.

(9 marks)

c) Assume the preference shares issued are convertible and each 200 preference share is convertible into 45 ordinary shares, how would it affect your answers in part (b). (7 marks)

Assume that on 1 January 2022, K Corporation signs a 10-year noncancelable lease agreement to lease a storage building from T-Tower Company. K Corporation's financial year end is 31 December. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of $83,824 beginning on 1 January 2022 . 2. The fair value of the building on 1 January 2022 is $550,000. 3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of $10,000. K Corporation depreciates similar buildings on the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the building reverts to the lessor. 5. K Corporation's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by K Corporation. 6. In addition to the annual rental payment, lessee is required to pay an annual insurance fee of $3,088 to lessor directly. The annual insurance fee is paid on every 1 January, starting from 1 January 2022. Required: (Note: all the journal entries must be rounded to the nearest dollar.) a) Prepare the following for K Corporation: i. present value of the lease payments. (6 marks) ii. lease amortization schedule (7 marks) iii. journal entries in the lessee's book to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the year 2022. (8 marks) b) What would be the lease liability if K Corporation knew the implicit rate is 8% ? (4 marks)