MCP 36-1 - Basic EPS with redeemable preference shares
Entity A is a corporation listed on a recognized stock exchange. Given below is an extract from its
statement of comprehensive income for the year ended Dec. 31, 2021.
Profit before tax
Income tax expense
Profit after tax
P580 000
150,000
430,000
In addition to the above information the entity paid during the year an ordinary dividend of P40,000 and
a dividend on its redeemable preference shares of P50,000. The entity had P100,000 of P0.50 ordinary
shares in issue throughout the year and authorized share capital of 1,000,000 ordinary shares.
What should be the basic earnings per share figure for the year computed in accordance with PAS 33?
a. P0.38
b. P0.43
c. P1.90
d. P2.15
MCP 36-2 - Basic loss per share
The statement of comprehensive income of Entity B reported a loss of P10,000,000 for the year ended
Dec. 31, 2021. The entity had shares outstanding as follows:
Ordinary share capital, P100 par, 400,000 shares
P40,000,000
Preference share capital, P100 par, 10%
cumulative, 100,000 shares convertible
into 100,000 ordinary shares
10,000,000
The basic loss per share should be
a. P22.00
b. P22.50
c. P25.00
d. P27.50
MCP 36-3 - Basic EPS with retrospective adjustment
At Dec. 31, 2021 Entity c had 300,000 ordinary shares and 10,000 shares 5%, par value cumulative
preference shares outstanding. No dividends were declared on either the preference or ordinary shares
in 2020 or 2021. On Feb. 1, 2022, prior to the date that the 2021 financial statements are authorized for
issue, the entity declared a 100% share dividend on its ordinary shares. Profit for 2021 was P950,000.
In its 2021 financial statements, the entity's 2021 earnings per share should be
a. P1.50
b. P1 58
C. P3.00
d. P3.17
MCP 36-4 - Comparative basic EPS with retrospective adjustment
Entity D has one class of ordinary shares outstanding and no other securities that are potentially
convertible into ordinary shares. During 2020, 100,000 ordinary shares were outstanding.
In 2021, the following distributions of additional ordinary shares occurred:
April 1 - Sold 20,000 treasury shares
July 1 - 2-for-1 share split
Profit was P410,000 in 2021 and P350,000 in 2020.
What amounts should Entity D report as basic earnings per share in its 2021 and 2020 comparative
statements of comprehensive income?
2021
2020
a. P1.78
P1.75
b. 1. 78
P3.50
c. P2.34
P1.75
d. P2.34
P3.50
MCP 36-5 - Comparative basic EPS with retrospective adjustment
Entity E's profit available for ordinary shareholders for the year ended P3,500,000 2020 and 2021 were
P2,100,000 respectively.
The ordinary shares in issue on Jan. 1, 2021 were 800,000.
Entity E offered existing shareholders a rights issue of one for five shares at a price of P6 per share
exercised on Apr. 1, 2021. The fair value of Entity E’s shares immediately, before the exercise of rights
was P10 per share.
What amounts should Entity E report as basic earnings per share in its 2021 and 2020 comparative
statements of comprehensive income?
2021
2020
a. P3.75
P2.45
b. P3.75
P2.63
c. P7.80
P2.45
d. P7.80
P2.63
MCP 36-6 - Diluted EPS; conceptual
Entity F had basic earnings per share of P15.00 for 2021. No conversion or exercise of convertible
securities occurred during 2021. However, possible conversion of convertible bonds would have reduced
earnings per share by P0.75. The effect of possible exercise of share options would have increased
earnings per share by P0.10.
What amount should Entity F report as diluted earnings per share for
a. P14.25
b. P14.35
c. P15.00
d. P15.10
MCP 36-7 - Diluted EPS; convertible instruments
Entity G's capital structure was as follows:
2020
2021
Outstanding securities:
Ordinary
1,000,000
1,000,000
Convertible preference
100,000
100,000
10% convertible bonds payable
P30,000,000
P30,000,000
During 2021, Entity G paid dividends of P15 per share on its preference shares. The preference shares
are convertible into 150,000 ordinary shares and the 10% bonds are convertible into 300,000 ordinary
shares. Profit for 2021 was P10,000,000. The income tax rate is 25%.
The diluted earnings per share for 2021 should be
a. P8.04
b P8.27
C. P8.45
d. P8.50
MCP 36-8 - Diluted EPS; convertible bonds split into debt and equity
On Jan. 1, 2021, Entity H issued 3-year 6,800 8% convertible bonds at par for P1,000 per bond. Interest is
payable annually in arrears. Each bond can be converted any time before maturity into 250 ordinary
shares. On maturity, Entity H has the option to settle the principal amount of the bonds in cash or in
ordinary shares. Market interest rate prevailing at the time of the bond issue without a conversion
option was 10%; similarly, the market price of one ordinary share at that date was P3. Other details are
as follows:
Profit for the year 2021
P3 400,000
Ordinary shares outstanding, P1 par
4,080,000
Convertible bonds outstanding
6,800,000
lgnoring income tax, the diluted earnings, per share for the year ended Dec. 31, 2021 is
a. P0. 65
b. P0.68
C. P0. 70
d. P0.83
MCP 36-9 - Basic and diluted EPS; convertible instruments and options
The information below pertains to Entity I. P1,200,000
Profit for the year
P1,200,000
8% convertible bonds issued at par
(P1,000 per bond). Each bond is convertible
into 40 ordinary shares
2,000,000
6% convertible, cumulative preference shares,
P100 par value. Each share is convertible into
3 ordinary shares.
3,000,000
Ordinary shares, P10 par value
6,000,000
Share options (granted in a prior year) to
purchase 50,000 ordinary shares at P20 per
share
500,000
Tax rate
25%
Average market price of ordinary shares
P25 per share
There were no changes during the year in the number of ordinary shares, preference shares, or
convertible bonds outstanding. There are no treasury shares.
Compute for the following:
1. Basic earnings per share
a. P1.07
b. P1.70
C. P1.82
d. P2.00
2. Diluted earnings per share
a. P1.65
b. P1.67
c. P1.69
d. P1.70
MCP 36-10 - Basic and diluted EPS denominator
Docx-12
The following information pertaining to Entity 3 is available in relation to computing basic and diluted
earnings per share amounts for the year ended Dec. 31, 2021
a. The entity is authorized to issue 8,000,000, P10 par value, ordinary shares. As of Dec. 31, 2020,
3,000,000 shares had been issued and were outstanding.
b. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred shares had been
issued on july 1, 2020. The share was issued at its par value of P25, and it has a cumulative dividend of
P3 per share. The share is convertible into ordinary shares at the rate of one share of convertible
preference for one share of ordinary. The rate of conversion is to be automatically adjusted for share
splits and share dividends. Dividends are paid quarterly on Sept. 30, Dec. 31, Mar. 31, and June 30.
c. Entity J is subject to a 25% income tax rate.
d. The after-tax profit for the year ended Dec. 31, 2021 was P13,550,000.
The following specific activities took place during 2021.
Jan. 1 – A 5% ordinary share dividend was issued. The dividend had been declared on Dec. 1, 2020, to all
shareholders of record on Dec. 29, 2020.
Apr. 1 – A total of 200,000 preference shares was converted into ordinary shares. The entity issued new
ordinary shares and retired the preference shares.
July 1 – A 2-for-1 ordinary share split became effective on this date. The board of directors had
authorized the split on June 1.
Aug. 1 – A total of 300,000 ordinary shares were issued to acquire a factory building.
Nov. 1 – A total of 24,000 ordinary shares were purchased on the open market at P9 per share. These
shares were to be held as treasury shares and were still in the treasury as of Dec. 31, 2021.
Preference shares cash dividends – Cash dividends to preference shareholders were declared and paid
as scheduled.
For the year ended Dec. 31, 2021, determine the number of shares to be used in computing:
1. Basic earnings per share
a. 6,367,000
b. 6,637,000
c. 6,736,000
d. 6,763,000
2. Diluted earnings per share
a. 7,286,000
b. 7,836,000
C. 7,891,000
d. 7,981,000