Question 3 Isabelle Leclerc is the controller at Carla Vista Pharmaceutical Industries, a public company. She is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Carla Vista's extemal financial statements. The following is selected financial information for the fiscal year ended June 30, 2020: CARLA VISTA PHARMACEUTICAL INDUSTRIES Selected Statement of Financial Position Information June 30, 2020 Long-term debt Notes payable, 10% $1,000,000 7% convertible bonds payable 6,000,000 10% bonds payable 7,000,000 Total long-term debt $14,000,000 $1,450,000 Shareholders' equity Preferred shares, $4.00 cumulative, 100,000 shares authorized, 29,000 shares issued and outstanding Common shares, unlimited number of shares authorized, 900,000 shares issued and outstanding Contributed surplus-conversion rights Retained earnings Total shareholders' equity 4,600,000 400,000 5,000,000 $11,450,000 The following transactions have also occurred at Carla Vista: 2. Options were granted by the company in 2018 to purchase 500,000 shares at $15 per share. Although no options were exercised during 2020, the average price per common share during fiscal year 2020 was $20. Each bond was issued at face value. The 7% convertible debenture will convert into common shares at 70 shares per $1,000 bond. It is exercisable after five years and was issued in 2019. Ignore any requirement to record the bonds' debt and equity components separately. The $4.00 preferred shares were issued in 2018. There are no preferred dividends in arrears, and preferred dividends were not declared in fiscal year 2020. The 0.9 million common shares were outstanding for the entire 2020 fiscal year. Net income for fiscal year 2020 was $1.5 million, and the average income tax rate was 30%. 5. 6. Nersion Calculate the income effect of the dividends on preferred shares. Dividends on preferred shares $ LINK TO TEXT LINK TO TEXT Calculate basic earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.) Basic EPS S LINK TO TEXT LINK TO TEXT Calculate the proceeds from assumed exercise of 500,000 options. Proceeds from exercise of options $ Calculate the incremental shares oustanding upon the exercise of options. The incremental shares oustanding upon the exercise of options Calculate the after-tax interest paid on the 7% bonds. After-tax interest on bonds converted $1 LINK TO TEXT LINK TO TEXT Determine an incremental per share effect for 7% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Incremental Numerator Effect Incremental Denominator Effect Potentially dilutive security EPS 7% Bonds $ LINK TO TEXT LINK TO TEXT Rank the potentially dilutive securities from most dilutive to least dilutive. 7% Bonds Options Calculate diluted earnings per share for 2020. (Round earnings per share to 2 decimal places, e.g. 15.25.) Numerator Denominator EPS Basic $1 Sub Total $ Diluted EPS