80.2K

Verified Solution

Link Copied!

Sandhill Inc. has 0.95 million common shares outstanding as at January 1, 2020. On June 30, 2020,4% convertible bonds were converted into 105,000 additional shares. Up to that point, the bonds had paid interest of $565,000 after tax. Net income for the year was $1,299,528. During the year, the company issued the following: 1. June 30: 12,090 call options giving holders the right to purchase shares of the company for $26 2. Sept. 30: 17,090 put options allowing holders to sell shares of the company for $21 On February 1, Sandhill also purchased in the open market 12,090 call options on its own shares, allowing it to purchase its own shares for $23. Assume the average market price for the shares during the year was $31. Assume further the following: 1. On September 30, 210,000 convertible preferred shares were redeemed. If they had been converted, these shares would have resulted in an additional 105,000 common shares being issued. The shares carried a dividend rate of $3 per share to be paid on September 30. No conversions have ever occurred. 2. There are 11,300 of $1,000,5% convertible bonds outstanding with a conversion rate of three common shares for each bond starting January 1, 2021. Beginning January 1, 2024, the conversion rate is six common shares for each bond; and beginning January 1, 2028, it is nine common shares for each bond. The tax rate is 30%. Calculate weighted common shares outstanding. Weighted common shares outstanding e Textbook and Media Calculate the income effect of the dividends on preferred shares. $ 1132000 Dividends on preferred shares Calculate the basic earnings per share under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round answer to 2 decimal places, e.g. 15.25.) Basic EPS $ e Textbook and Media Determine an incremental per share effect for $3 preferred shares. Incremental Numerator Effect Incremental Denominator Effect Potentially dilutive security EPS $3 Preferred shares $ $ e Textbook and Media Calculate the after-tax interest paid on the 5% bonds. $ After-tax interest on bonds converted e Textbook and Media Determine an incremental per share effect for 5% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Incremental Numerator Effect Incremental Denominator Effect Potentially dilutive security EPS 5% Bonds $ $ e Textbook and Media Calculate pro-rated incremental shares from assumed exercise of 12,090 options. Pro-rated incremental shares e Textbook and Media Rank the potentially dilutive securities from most dilutive to least dilutive. $3% Preferred shares 5% Bonds Options e Textbook and Media Calculate the diluted EPS numbers under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round earnings per share to 2 decimal places, e.g. 15.25.) a Numerator Denominator EPS $ Basic $ Call Options $ $ Diluted EPS e Textbook and Media Show the required presentations on the face of the income statement. (Round answers to 2 decimal places, e.g. 15.25.) Sandhill Inc. Partial Income Statement Earnings Per Common Share: Basic Earnings Per Share $ Diluted Earnings Per Share $ e Textbook and Media Sandhill Inc. has 0.95 million common shares outstanding as at January 1, 2020. On June 30, 2020,4% convertible bonds were converted into 105,000 additional shares. Up to that point, the bonds had paid interest of $565,000 after tax. Net income for the year was $1,299,528. During the year, the company issued the following: 1. June 30: 12,090 call options giving holders the right to purchase shares of the company for $26 2. Sept. 30: 17,090 put options allowing holders to sell shares of the company for $21 On February 1, Sandhill also purchased in the open market 12,090 call options on its own shares, allowing it to purchase its own shares for $23. Assume the average market price for the shares during the year was $31. Assume further the following: 1. On September 30, 210,000 convertible preferred shares were redeemed. If they had been converted, these shares would have resulted in an additional 105,000 common shares being issued. The shares carried a dividend rate of $3 per share to be paid on September 30. No conversions have ever occurred. 2. There are 11,300 of $1,000,5% convertible bonds outstanding with a conversion rate of three common shares for each bond starting January 1, 2021. Beginning January 1, 2024, the conversion rate is six common shares for each bond; and beginning January 1, 2028, it is nine common shares for each bond. The tax rate is 30%. Calculate weighted common shares outstanding. Weighted common shares outstanding e Textbook and Media Calculate the income effect of the dividends on preferred shares. $ 1132000 Dividends on preferred shares Calculate the basic earnings per share under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round answer to 2 decimal places, e.g. 15.25.) Basic EPS $ e Textbook and Media Determine an incremental per share effect for $3 preferred shares. Incremental Numerator Effect Incremental Denominator Effect Potentially dilutive security EPS $3 Preferred shares $ $ e Textbook and Media Calculate the after-tax interest paid on the 5% bonds. $ After-tax interest on bonds converted e Textbook and Media Determine an incremental per share effect for 5% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.) Incremental Numerator Effect Incremental Denominator Effect Potentially dilutive security EPS 5% Bonds $ $ e Textbook and Media Calculate pro-rated incremental shares from assumed exercise of 12,090 options. Pro-rated incremental shares e Textbook and Media Rank the potentially dilutive securities from most dilutive to least dilutive. $3% Preferred shares 5% Bonds Options e Textbook and Media Calculate the diluted EPS numbers under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round earnings per share to 2 decimal places, e.g. 15.25.) a Numerator Denominator EPS $ Basic $ Call Options $ $ Diluted EPS e Textbook and Media Show the required presentations on the face of the income statement. (Round answers to 2 decimal places, e.g. 15.25.) Sandhill Inc. Partial Income Statement Earnings Per Common Share: Basic Earnings Per Share $ Diluted Earnings Per Share $ e Textbook and Media

Answer & Explanation Solved by verified expert

See Answer