Rainmaker plc prepares its financial statements to 31 December each year and the company's issued ordinary share capital on 1 January 2020, which comprised 50 pence ordinary shares, was 10,000. On 1 August 2020, the company capitalised reserves by issuing two bonus 50 pence ordinary shares for each 50 pence ordinary share held. Rainmaker plc's profit before tax for the year ended 31 December 2020 was 800,000. The company's income tax liability for 2020 was assessed at 200,000 before adjusting for an under-provision of 25,000 in respect of 2019. Rainmaker plc has an effective rate of income tax of 25%. Additional Information 1. In 2018, Rainmaker plc issued options that give the company's directors the right to subscribe for 50 pence ordinary shares between 2019 and 2023 at 150 pence per ordinary share. At 31 December 2020 there were 20,000 options still outstanding. 2. During the year ended 31 December 2020, Rainmaker plc had 500,000 1 10% convertible preference shares in issue. Each preference share may be converted into two 50 pence ordinary shares during the year ended 31 December 2021. 3. On 1 January 2020, Rainmaker plc had 200,000 10% convertible loan stock in issue. On 1 September 2020, the loan stock was converted into 50 pence ordinary shares on the basis of 12 ordinary shares for each 20 of loan stock. 4. Rainmaker plc's average share price during the year ended 31 December 2020 was 200 pence. Requirement (a) Calculate Rainmaker plc's basic and diluted earnings per share for the year ended 31 December 2020 in accordance with IAS 33 Earnings Per Share. 20 Marks (b) During 2020, Rainmaker plc purchased freehold land which is currently stated at its cost of 5,000,000 in the financial statements for the year ended 31 December 2020. While the land has not been depreciated in the company's financial statements for the year ended 31 December 2020, the directors would like to do so in future years. Requirement Advise the directors of Rainmaker plc whether the proposed policy is appropriate. 5 Marks Total 25 Marks Rainmaker plc prepares its financial statements to 31 December each year and the company's issued ordinary share capital on 1 January 2020, which comprised 50 pence ordinary shares, was 10,000. On 1 August 2020, the company capitalised reserves by issuing two bonus 50 pence ordinary shares for each 50 pence ordinary share held. Rainmaker plc's profit before tax for the year ended 31 December 2020 was 800,000. The company's income tax liability for 2020 was assessed at 200,000 before adjusting for an under-provision of 25,000 in respect of 2019. Rainmaker plc has an effective rate of income tax of 25%. Additional Information 1. In 2018, Rainmaker plc issued options that give the company's directors the right to subscribe for 50 pence ordinary shares between 2019 and 2023 at 150 pence per ordinary share. At 31 December 2020 there were 20,000 options still outstanding. 2. During the year ended 31 December 2020, Rainmaker plc had 500,000 1 10% convertible preference shares in issue. Each preference share may be converted into two 50 pence ordinary shares during the year ended 31 December 2021. 3. On 1 January 2020, Rainmaker plc had 200,000 10% convertible loan stock in issue. On 1 September 2020, the loan stock was converted into 50 pence ordinary shares on the basis of 12 ordinary shares for each 20 of loan stock. 4. Rainmaker plc's average share price during the year ended 31 December 2020 was 200 pence. Requirement (a) Calculate Rainmaker plc's basic and diluted earnings per share for the year ended 31 December 2020 in accordance with IAS 33 Earnings Per Share. 20 Marks (b) During 2020, Rainmaker plc purchased freehold land which is currently stated at its cost of 5,000,000 in the financial statements for the year ended 31 December 2020. While the land has not been depreciated in the company's financial statements for the year ended 31 December 2020, the directors would like to do so in future years. Requirement Advise the directors of Rainmaker plc whether the proposed policy is appropriate. 5 Marks Total 25 Marks