NAME: ________________ C/Y/S: __________ SEATWORK ON BVPS AND EPS

On January 1, 20x6, Cee U L8R Company has the following shareholders' equity account.

Ordinary shares, $10 par, 150,000 issued shares 1,500,000

Cumulative preference shares, 10%, $50 par, liquidation value of $60
50,000 issued shares 2,500,000
Share premium - ordinary 150,000
Share premium - preference 1,980,000
Share premium on ordinary treasury shares 500,000
Share premium - conversion privilege of preference share 150,000
Ordinary treasury shares, $15 cost 112,500
Preference treasury shares, $60 cost 150,000
Retained earnings 2,000,000

* Net income for the year amounted to 500,000.

* Dividend is in arrears for three years including the current year.
* Ordinary share capital transactions during the year are as follows:
Apr 1 Issuance at $12 per share 20,000
May 1 Stock split of 2 to 1
Jun 3 Issuance at $8 per share 40,000
Jul 1 Reacquired for $7 10,000
Retired from ordinary treasury 750
Aug 1 Conversion of preference share 30,000
Conversion of bonds 10,000
Sep 30 Issuance at $6 per share 100,000
Nov 1 Share dividend of 20%

* Cee U L8R has the following potential ordinary shares during the year:
(a) 30,000 of the preference shares are convertible into 90,000 ordinary shares. The company declared dividends during year-end where
preference share received $5 per share.
(b) On April 1 of this year, the company issued a 5-year $1,000,000 10% convertible bonds, the interest is payable annually. The effective rate of
the bond with and without the conversion privilege is 8% and 9%, respectively. The bonds is convertible into 20,000 ordinary shares. Half of
the bonds were converted into ordinary shares. The number of shares were adjusted accordingly after share split.

(c) On April 1 of this year, the company issued a 2-year, $1,000,000 10% bonds with warrants, the interest is payable annually. The bonds,ex-
warrant has an effective interest rate of 9%. The warrant can be used to purchase 20,000 ordinary shares for $15 per share. The bonds are
issued at a quoted price of 110. The number of shares and the exercise price were adjusted accordingly after share split. The average
market price of the ordinary shares is $10.
Required:
(a) Compute for the book value per share of ordinary and preference shareholders. (5 points each)
Ordinary ---> Preference --->
SOLUTION TO LETTER (A)
(b) Compute for the basic and diluted earnings per share. (5 points each)
BEPS ---> DEPS --->
SOLUTION TO LETTER (B)

(c) Prepare the shareholders' equity as of December 31, 20x6. (10 points)