Use two decimals for calculation.

First Cup Ltd., a Canadian coffee retailer and roaster which operates more than 1,000 cafes in Canada, reported the following balances as at December 31, 2019:

7% Par $100 convertible bonds, issued at par $ 250,000

3,000 call options, each entitled to purchase 1 common share

Cumulative Preferred shares, 36,000 convertible shares outstanding $ 960,000

Common shares, 112,500 shares issued and outstanding 2,880,000

Contributed surplus on repurchase of common shares 31,200

Retained earnings 1,032,000

First Cup Ltd. applies IFRS. The company also informed you details related to the following transactions during 2020:

a] On February 1, the company declared and distributed a 20% stock dividend for its common shareholders. The shares were being traded in the market at $30.

b] On March 1, it acquired 18,000 of its own common shares in the market at $30.00 per share and retired them on the same day.

c] On April 1, the company issued 17,500 common shares in exchange for plant and equipment assessed at $336,000.

d] On May 1, 40% of the call option holders exercised their options when the market price of the common share was $31. As these options were issued before stock dividends, options holders receive an increased number of shares considering a 20% stock dividends (i.e. adjust for stock dividend).

e] On May 15, the company declared a 3:1 stock split on common shares. The common shares were being traded at the adjusted market price of $32.00 per share

f] On August 1, the company issued share certificates for 3,708 common shares to subscribers who had applied to an earlier share subscription issue. These subscribers had paid for the shares they had subscribed at $34 per share.

g] On October 1, 20% of the bond holders submitted their bonds to the company for conversion into common shares. As the bonds were issued before stock dividends and stock split, the number of shares given to reward conversion need to be adjusted consequently.

h] No Dividends have been declared in the previous two years. Dividends for the current year were also not declared.

Additional Information

i] The cumulative preferred shares had been issued several years ago when the company was incorporated. Cumulative preferred shares carried a dividend rate of $2.10 per share and as at January 1, 2020, one preferred share could be converted into two common shares.

ii] The company reported earnings from operations of $1,847,790 for 2020. There were no discontinued items to report in 2020.

iii] The bonds had been issued at par in 2017. Assume No premium was charged for the conversion rights and debt was credited for the full amount received. Each $100 bond was convertible into 8 common shares.

Assume a 20% tax rate for 2020 and an average market price of $10 (which reflects adjustments for dividends and splits) for the companys common shares during 2020.

Regardless of your computations in Section A above, assume that the weighted average number of shares for basic EPS is now 407,400 shares and calculate basic eps dependently to identify dilutive securities

Now assume for this section only that there were no transactions affecting share equity during 2020. Thus on December 31, 2020, the company reported the following:

Cumulative Preferred shares, 36,000 convertible shares outstanding $ 960,000

Common shares, 112,500 shares issued and outstanding 2,880,000

Retained earnings, beginning, as at 1/1/20 1,032,000

Further, the company also reported earnings from operations of $1,847,790 for 2020. The cumulative preferred shares, as stated above, could participate in dividends declared after the common shares received a minimum dividend of $3.00 per share. Participation in the excess dividends is based on the relative total capital contributed by each group. The company management wishes to declare dividends for 2020 such that each common share would be entitled to a dividend of $4 per share. Dividends were last declared in 2017.

Required:

1. Use the schedule below to answer the following:

a] The total dividends which the management would declare; and

b] The total amounts payable to each group of shareholders.

Distribution Of Dividends

Item	Preferred	Common	Total Available
Preferred Arrears
Current Dividend Preferred
Minimum Dividend Common
Excess Dividend Common
Excess Dividend Preferred
Total Dividends Distributed