Pilum
A statement showing the retained profit of Pilum for the year ended 31 December 20X4 is set out below.
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$
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$
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Profit before tax
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2,530,000
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Less income tax expense
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(1,127,000)
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1,403,000
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Transfer to reserves
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(230,000)
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Dividends:
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Paid preference interim dividend
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138,000
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Paid ordinary interim divided
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414,000
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Declared preference final dividend
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138,000
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(690,000)
483,000
Retained
On 1 January 20X4 the issued share capital of Pilum was 4,600,000 6% preference shares of $1 each and 4,120,000 ordinary shares of $1 each.
Required
Calculate the earnings per share (on basic and diluted basis) in respect of the year ended 31 December 20X4 for each of the following circumstances (Each of the three circumstances (a) to (c) is to be dealt with separately.)
(a) On the basis that there was no change in the issued share capital of the company during the year ended 31 December 20X4.
(b) On the basis that the company made a rights issue of $1 ordinary shares on 1 October 20X4 in the proportion of 1 for every 5 shares held, at a price of $1.20. The market price for the shares at close of trade on the last day of quotation cum rights was $1.78 per share.
(c) On the basis that the company made no new issue of shares during the year ended 31 December 20X4 but on that date it had in issue $1,500,000 10% convertible loan stock 20X8 - 20Y1. This loan stock will be convertible into ordinary $1 shares as follows.
20X8 90 $1 shares for $100 nominal value loan stock
20X9 85 $1 shares for $100 nominal value loan stock
20Y0 80 $1 shares for $100 nominal value loan stock
20Y1 75 $1 shares for $100 nominal value loan stock
Assume where appropriate that the income tax rate is 30%.