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Question 1 (Basic and diluted earnings per share): Donald Limited has accumulated the following information...

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Accounting

Question 1 (Basic and diluted earnings per share):

Donald Limited has accumulated the following information relevant to its 2021 earnings per share.

  1. Net income for 2021, $415,000.
  2. Preference share: On July 1, 2021, the company had issued 6,000 shares of $6 preference share at $105 per share. Each share of preference share is currently convertible into 3 shares of ordinary share. To date, no preference share has been converted and no additional shares of preference share have been issued. The current dividends have been paid.
  3. Ordinary share: At the beginning of 2021, 46,000 shares were outstanding. On August 1, 5,000 additional shares were issued. On September 1, a 20% bonus issue was declared and issued. On November 1, 3,000 shares were repurchased by the company.
  4. Share options: Options to acquire ordinary share at a price of $30 per share were outstanding during all of 2021. Currently, 5,000 shares may be acquired. To date, no options have been exercised.
  5. Miscellaneous: Stock market prices on ordinary share averaged $36 per share during 2021, and the 2021 ending stock market price was $40 per share. The corporate income tax rate is 25%.

Required:

Compute the basic and diluted earnings per share for 2021 (Round to 3 decimal places).

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