Situation 1:

(3 marks)

On January 1, 2023, Vancouver Inc. had 190,000 common shares outstanding. On March 1, the corporation repurchased and retired 30,000 of its own outstanding shares held by one significant shareholder who was in need of cash. On June 1, the corporation declared and distributed a 15% stock dividend on its remaining common shares. On December 1, the corporation issued 3,000 common shares as part of an executive compensation bonus.

Instructions

Calculate the weighted average number of shares outstanding as at December 31, 2023.

Show your calculations and round to the nearest share.

Situation 2:

(10 marks)

Burnaby Inc., a company that follows IFS, had net income for the fiscal year ended December 31, 2023, of $2,260,000. Dividends totaling $1,000,000 were declared to the shareholders (common and preferred combined). There were 600,000 common shares outstanding throughout 2023. The average market price of the common shares for the entire fiscal year was $45. Burnaby's tax rate was 30% for 2023.

Burnaby had the following potential common shares outstanding during 2023:

1. Options to buy 60,000 common shares at $35 per share.
2. Options to buy 80,000 common shares at $50 per share.
3. 7% convertible bonds with a principal amount of $8 million, issued at par. Each $1,000 bond is convertible into 20 common shares.
4. 100,000 convertible preferred shares entitled to a cumulative dividend of $4 per share. Each preferred share is convertible into 2 common shares.

Instructions

Calculate the following for Burnaby Inc. for 2023. Round to the nearest cent. For simplicity, ignore the requirement to record the debt and equity components separately.

1. Basic earnings per share
2. Diluted earnings per share C. Diluted earnings per share if the interest rate on the bonds was 9%.

d. Basic earnings per share if the dividends were not declared.