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268 Chapter 7 12. Odetsky. Inc. has 5,000.000 ordinary shares outstanding on December 31. 2005. An additional 1,000,000 ordinary shares were issued on April 1. 2006 and 500,000 more on July 1. 2006. On October 1, 2006, Odetsky issued 10,000, P1000 face value, 7% convertible bonds. Each bond is convertible into 40 ordinary shares and were considered potential ordinary shares and no bonds were converted into ordinary shares in 2006. What is the number of shares to be used in computing basic carnings per share and diluted earnings per share. respectively? a. 5.750.000 and 5,950.000 b. 5.750,000 and 6,150,000 C 6,000,000 and 6. 100.000 6.000.000 and 6,900,000 13. A. J. Company had 100,000 ordinary shares issued and outstanding at December 31, 2005. On July 1, 2006, A. J. issued a 10% stock dividend. Unexercised stock options to purchase 20,000 ordinary shares (adjusted for the 2006 stock dividend) at P20 per share were outstanding at the beginning and end of 2006. The average market price of A I.'s ordinary shares (which was not affected by the stock dividend) was P25 per share during 2006. Net income for the year ended December 31, 2006, was P550,000. What should be A. J.'s 2006 diluted earnings per ordinary share, rounded to the nearest centavo? a. P4.82 b. P5.0( C. P5.05 1. P5.24 14. DB Corporation's capital structure was as follows: December 31 2005 2006 Outstanding shares of stock: Ordinary .................it!:4: 1 10,000 1 10,000 Convertible preference shares .... 10,000 10,000 8% Convertible bonds ... .. P1,090,000 P1,000,000 Gross Profit Variation Analysis and Earnings Per Share Determination 269 During 2006, DB paid dividends of P3 00 per share on its preference shares. The preference shares are convertible into 20.0100 ordinary shares and are considered potential ordinary shares The *% bonds are convertible into 30,000 ordinary shares and considered potential ordinary shares. Net income for 2006 was PESO.00() Assume that the P7 45 income tax rate is 30% The diluted earnings per share for 2006 is P6.54 C. P7.08 d. P5 66 15. KCM, Inc. had 200,000 shares of P20 par ordinary shares and 20.000 shares of P100 par, 6% cumulative, convertible preference share outstanding for the entire year ended December 31, 2005 Each preference share is convertible into S ordinary shares KCM's net income for 2005 was P840,000. For the year ended December 31. 2005, the basic earnings per share is P2.40 P2.80 C. P3.60 d P4.20