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Question 1 (Basic and diluted earnings per share): Donald Limited has accumulated the following information relevant to its 2021 earnings per share. Net income for
Question 1 (Basic and diluted earnings per share):
Donald Limited has accumulated the following information relevant to its 2021 earnings per share.
- Net income for 2021, $415,000.
- Preference share: On July 1, 2021, the company had issued 6,000 shares of $6 preference share at $105 per share. Each share of preference share is currently convertible into 3 shares of ordinary share. To date, no preference share has been converted and no additional shares of preference share have been issued. The current dividends have been paid.
- Ordinary share: At the beginning of 2021, 46,000 shares were outstanding. On August 1, 5,000 additional shares were issued. On September 1, a 20% bonus issue was declared and issued. On November 1, 3,000 shares were repurchased by the company.
- Share options: Options to acquire ordinary share at a price of $30 per share were outstanding during all of 2021. Currently, 5,000 shares may be acquired. To date, no options have been exercised.
- Miscellaneous: Stock market prices on ordinary share averaged $36 per share during 2021, and the 2021 ending stock market price was $40 per share. The corporate income tax rate is 25%.
Required:
Compute the basic and diluted earnings per share for 2021 (Round to 3 decimal places).
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