Problem 2 [40 minutes, 20 marks] The following information is taken from Sylvester Corporation's financial statements at year end: Bond Payable, 10%, convertible par value $500,000, net of discount $480,000 Bond Payable, 8%, convertible par value $100,000 $100,000 Preferred A Shares, $2.50, cumulative, non-convertible; 20,000 shares outstanding $200,000 Preferred B Shares, $1.50, non-cumulative, convertible into common shares at the rate of five common shares for each share preferred; 5,000 shares outstanding $50,000 Conversion Rights Convertible Bond $150,000 Contributed Surplus Stock Options $18,000 Common Shares, no par; 1,000,000 authorized, 670,000 issued and outstanding. $1,300,000 Income after tax from continuing operations $950,000 Income after tax from discontinued operations $14,000 Net Income $964,000 Additional information is as follows: No dividends were declared last year Total dividends declared this year were $600,000 10% Bonds, each $1,000 bond is convertible into 75 common shares. Interest expense on the bonds for the year was $57,600 including bond discount. 8% Bonds were issued at par on May 1; each $1,000 bond is convertible into 30 common shares. 28,000 options to purchase one common share per option at $4 per share were outstanding at the beginning of the year. On October 1, 8,000 options were exercised. The average market price of the common shares for the past year was $10. Common Shares activity was as follows: 450,000 shares outstanding on January 1; declared a 20% stock dividend on March 1; 120,000 additional shares issued for cash on July 1, Oct 1 8,000 options were exercised. The tax rate is 40%; and Sylvester has a Dec 31st year end. Required: Calculate basic and fully diluted EPS. (Show all calculations and round to the nearest cent)

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Problem 2 [40 minutes, 20 marks] The following information is taken from Sylvester Corporation's financial statements at year end: Bond Payable, 10%, convertible par value $500,000, net of discount Bond Payable, 8%, convertible par value $100,000 $480,000 $100,000 Preferred A Shares, $2.50, cumulative, non-convertible; 20,000 shares outstanding $200,000 Preferred B Shares, $1.50, non-cumulative, convertible into common shares at the rate of five common shares for each share preferred, 5,000 shares outstanding $50,000 Conversion Rights - Convertible Bond $150,000 Contributed Surplus - Stock Options $18,000 Common Shares, no par; 1,000,000 authorized, 670,000 issued and outstanding. $1,300,000 Income after tax from continuing operations Income after tax from discontinued operations Net Incorne $950,000 $14,000 $964,000 . . . Additional information is as follows: No dividends were declared last year Total dividends declared this year were $600,000 10% Bonds, each $1,000 bond is convertible into 75 common shares. Interest expense on the bonds for the year was $57,600 including bond discount. 8% Bonds were issued at par on May 1, each $1,000 bond is convertible into 30 common shares 28,000 options to purchase one common share per option at $4 per share were outstanding at the beginning of the year. On October 1, 8,000 options were exercised. The average market price of the common shares for the past year was $10 Common Shares activity was as follows: 450,000 shares outstanding on January 1; declared a 20% stock dividend on March 1, 120,000 additional shares issued for cash on July 1, Oct 18,000 options were exercised. The tax rate is 40%, and Sylvester has a Dec 31st year end. Required: Calculate basic and fully diluted EPS. (Show all calculations and round to the nearest cent)