QUESTION 2 Below is the partial statement of financial position of AXL Bhd as at 31 Decemb...

QUESTION 2

Below is the partial statement of financial position of AXL Bhd as at 31 December 2017.

Equity:

RM

10% cumulative convertible preference shares at RM10 per share; 1,000,000 shares authorised, 500,000 shares issued and outstanding

5,000,000

Ordinary share capital valued at RM5 per share; 2,000,000 shares authorised, 1,000,000 shares issued and outstanding

5,000,000

Retained earnings

25,000,000

Total equity

35,000,000

Long-term debt:

Convertible bonds payable (Issue A)

6,000,000

Convertible bonds payable (Issue B)

4,000,000

Total long-term debt

10,000,000

Additional information:

  1. The 10% cumulative, convertible preference shares were issued at the beginning of 2017. Each preference share is convertible into two ordinary shares. On 1 July 2018, 50,000 convertible preference shares were converted into ordinary shares.
  2. Both convertible bonds were issued in 2017. Each bond has a face value of RM1,000 and is convertible into 25 shares of ordinary shares. In 2018, interest expense for convertible bonds (Issue A) is RM200,000 and interest expense for convertible bonds (Issue B) is RM90,000.
  3. Shares options were granted at the beginning of 2017 to purchase 200,000 ordinary shares at RM20 per share. During 2018, the average market price of the shares was RM25 per share.
  4. The board of directors authorized a 3-for-1 share split which became effective on 1 September 2018. The rate of conversion for convertible securities and the right under shares options are adjusted for the share split.
  5. Income tax rate is 26%.
  6. Preference dividends were not declared in 2018.
  7. Net income in 2018 was RM7,500,000.
  8. Round the answer to TWO (2) decimal points.

REQUIRED:

  1. Calculate the basic earnings per share (BEPS) for 2018.

RM

Net income

7,500,000

(-) 10% Convertible PS [10% x (----) x RM10 x ------]

(333,000)

Profit attributable to ordinary shareholders

7,167,000

Shares= ------x 3 (share split) x 12/12 + ------x 6/12 = 3,150,000

BESP= ------/------= 2.28

(FILL IN THE BLANK)

Solved
ACCOUNTING 1 Answer OPINION JOSEPH JOHN S

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