50.1K

Verified Solution

Link Copied!

On September 30, 2021, the balance sheet of Cannon Inc included the following instruments:

• $1,500,000 of 9% bonds due January 1, 2025, convertible into 60 shares per $1,000 bond.
• The bonds were originally issued at par.
• $300,000 cumulative preferred shares with a dividend at 4%. There are no dividends in arrears.
• 600,000 common shares carried at $3,579,000.
• Written options for 55,000 of Cannon Inc common shares. The options have a strike price of $15.

The following additional information is available about the year ended September 30, 2022:

• On Oct 31, 2021, Cannon Inc issued 35,000 common shares for a price of at $14.
• At year end, Cannon Inc declared a cash dividend on the preferred shares. At that point, the common shares were trading at $23.Through the year, the shares traded at an average price of $22.
• All of the options were exercised during the year.
• After taxes at 25%, Cannon Inc reported net income of $751,000. Cannon reports under IFRS

Required:

Unless specifically told to answer to 2 decimal places, ensure your answers to the following questions are rounded to the nearest dollar. Enter your answer with no dollar signs and no commas. For example, for $1,000,000 .49 please enter 1000000 and for $100,000.79 enter 100001

Below there are 10 boxes. Please insert in the first box your answer to the first question, insert your answer to the second question into the second box and so on until the 10th question is answered in the 10th box. Be careful not to insert your answer into the wrong box!

1. To calculate the basic earnings per share, the numerator would be

2. To calculate the basic earnings per share, the denominator would be

3. The Basic earnings per share - to two decimal places ( e.g., For $1.294 , enter 1.29) would be

If looking at the convertible bonds independent of any financial instruments:

4. The numerator impact of the bond conversion would be

5. The denominator impact of the bond conversion would be

6. if this was the only convertible instrument, it would be Dilutive - Enter 1 for true or 0 for false

If looking at the written options independent of any financial instruments:

7. The numerator impact of the option conversion would be

8. The denominator impact of the option conversion would be

9. if this was the only convertible instrument, it would be dilutive - Enter 1 for true or 0 for false

If looking at both the written options and the convertible bonds:

10. What would the fully diluted earnings per share would be? Answer to two decimal places ( e.g. For $1.294 , enter 1.29

Answer & Explanation Solved by verified expert

See Answer