Question 1 Deluxe Limited has prepared the following comparative statements of financial position for 2018 and 2019: Plant assets Accumulated depreciation Prepaid expenses Inventory Receivables Cash 2019 2018 $ $ 1,260,000 1,050.000 (297.000) (201,000) 18,000 27,000 150,000 180,000 159.000 117,000 297.000 153,000 1.587.000 1.326.000 129,000 66,000 850,000 153,000 168,000 60,000 42,000 645,000 600.000 200.000 1.587.000 1.326,000 Retained earnings Mortgage payable Accounts payable Accrued liabilities Share capital -1,000 5% non-convertible preference shares Share capital- 300,000 ordinary shares Additional notes: (1) The Accumulated Depreciation account has been credited only for the depreciation expense for the period. (2) The Retained Earnings account has been charged for dividends of $138,000 (including ordinary and preference shares dividends) and credited for the net income for the year. Question 1 (continued (3) The income statement for 2019 is as follows: Sales Cost of sales Gross profit Operating expenses Net income $1,980,000 1.089.000 891,000 690.000 201.000 (4) There were 100.000 issued ordinary shares on 1 January 2019 and the company issued 1,000 5% non-convertible preference shares on 1 March 2019 and 200,000 ordinary shares on 1 April 2019. respectively. (5) Top executives were granted 30,000 options to buy ordinary shares at an exercise price of S40 if the net income of the company can achieve over $200,000. The beginning and ending market price of the ordinary shares was $40 and $60 respectively during the year 2019. Required: (a) Prepare a Statement of Cash Flows using INDIRECT METHOD for Deluxe Limited for the year ended 31 December 2019. (11 marks) (b) Prepare a schedule of "Cash provided by operating activities using DIRECT METHOD for Deluxe Limited for the year ended 31 December 2019. (5 marks) C) Compute the basic earnings per share for the year 2019. (Answers should be rounded to four decimal places) (3 marks) (d) Compute the diluted earnings per share for the year 2019. (Answers should be rounded to four decimal places) (3 marks) (e) Assume the preference shares are convertible to 30,000 ordinary shares, how does it affect your answer in part (d) above? Explain within 80 words. (3 marks) Question 1 Deluxe Limited has prepared the following comparative statements of financial position for 2018 and 2019: Plant assets Accumulated depreciation Prepaid expenses Inventory Receivables Cash 2019 2018 $ $ 1,260,000 1,050.000 (297.000) (201,000) 18,000 27,000 150,000 180,000 159.000 117,000 297.000 153,000 1.587.000 1.326.000 129,000 66,000 850,000 153,000 168,000 60,000 42,000 645,000 600.000 200.000 1.587.000 1.326,000 Retained earnings Mortgage payable Accounts payable Accrued liabilities Share capital -1,000 5% non-convertible preference shares Share capital- 300,000 ordinary shares Additional notes: (1) The Accumulated Depreciation account has been credited only for the depreciation expense for the period. (2) The Retained Earnings account has been charged for dividends of $138,000 (including ordinary and preference shares dividends) and credited for the net income for the year. Question 1 (continued (3) The income statement for 2019 is as follows: Sales Cost of sales Gross profit Operating expenses Net income $1,980,000 1.089.000 891,000 690.000 201.000 (4) There were 100.000 issued ordinary shares on 1 January 2019 and the company issued 1,000 5% non-convertible preference shares on 1 March 2019 and 200,000 ordinary shares on 1 April 2019. respectively. (5) Top executives were granted 30,000 options to buy ordinary shares at an exercise price of S40 if the net income of the company can achieve over $200,000. The beginning and ending market price of the ordinary shares was $40 and $60 respectively during the year 2019. Required: (a) Prepare a Statement of Cash Flows using INDIRECT METHOD for Deluxe Limited for the year ended 31 December 2019. (11 marks) (b) Prepare a schedule of "Cash provided by operating activities using DIRECT METHOD for Deluxe Limited for the year ended 31 December 2019. (5 marks) C) Compute the basic earnings per share for the year 2019. (Answers should be rounded to four decimal places) (3 marks) (d) Compute the diluted earnings per share for the year 2019. (Answers should be rounded to four decimal places) (3 marks) (e) Assume the preference shares are convertible to 30,000 ordinary shares, how does it affect your answer in part (d) above? Explain within 80 words
