Book Value Per Share Basic Earnings Per

Book Value per Share, Basic
Earnings per Share and

Diluted Earnings per Share
17 September 2016
Book value per share
 Definition and formula
 Accounting procedures
 Preference as to assets
 Preference as to dividends
UNOR - College of Business and Accountancy

1
17 September 2016
Slide 2
Definition and importance
• The amount that would be paid on each share assuming the
entity is liquidated and the amount available to the
shareholders is exactly the amount reported in the
shareholders’ equity (Valix et al., 2015).
• Measure used by owners of shares in a firm to determine the
level of safety associated with each individual share after all
debts are paid accordingly.
• Should the company decide to dissolve, the book value per
common indicates the peso value remaining for common
shareholders after all assets are liquidated, all debtors are paid
and preferred shareholders’ rights are considered.
• Calculated using historical costs.
17 September 2016
Slide 3
Definition - preference shares
• Liquidation value - normally received upon liquidation; may be
more than the par value
• Preference shareholders may be:
1. Preferred as to assets
2. Preferred as to dividends
• Noncumulative preference share - entitled to current
year dividends only
• Cumulative preference share - all dividends in arrears
• Nonparticipating preference share – dividends equal
to the fixed rate
• Participating preference share - entitled to dividends
aside from the fixed rate (fully, participation up to
certain extent)
17 September 2016
Slide 4
Formula
One class of share capital:
𝑇𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
17 September 2016
Slide 5
Illustration No. 1
The shareholders’ equity in the statement of financial position on
December 31, 2015 showed the following:
Share capital, P100 par, 50,000 shares P5,000,000

Share premium 1,000,000
Retained earnings 2,000,000
Revaluation surplus 1,500,000
Total shareholders’ equity P9,500,000
17 September 2016
Slide 6
Illustration No. 1 (Cont’d)
𝑇𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
𝑃9,500,000
=
50,000 𝑠ℎ𝑎𝑟𝑒𝑠
= 𝑃190 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
17 September 2016
Slide 7
Formula (Cont’d.)
Two classes of share capital
𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑝𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑠ℎ𝑎𝑟𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑝𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
17 September 2016
Slide 8
Accounting procedures
1. The amount equal to the par value is allocated to the preference
share and ordinary share.
2. Any balance of the shareholders’ equity in excess of the par or
stated value is then apportioned taking into account the
liquidation value and dividend rights of the preference
shareholders.
For book value purposes, the following are assumed to be
available for dividends:
a. Retained earnings (R/E)
b. Share premium (SP)
c. Revaluation surplus
3. Treasury share are treated as retired [gain (SP), loss (SP, R/E)]
17 September 2016
Slide 9
Accounting procedures (Cont’d)
SPECIAL NOTES ON PREFERENCE SHARE AS TO DIVIDENDS
1. ‘No specific designation - assume noncumulative,
nonparticipating
2. Dividends in arrears - include current dividends, must be
specifically disclosed
3. Two classes of preference shares with different rates both
participating - lower rate will be the basis for allocation of
ordinary shares
If one preference share is participating, rate of the participating
preference share will be used as basis
17 September 2016
Slide 10
Preference as to assets
The preference shareholders are entitled to

payments not only for liquidation value but also
for dividends in arrears.
17 September 2016
Slide 11
Preference as to dividends
If dividends are declared, the preference

shareholders have the right to receive
dividends first before the ordinary shareholders
are paid dividends
17 September 2016
Slide 12
Illustration 2
Preference share capital, 12% P100 par, 25,000 shares P2,500,000

Ordinary share capital, P100 par, 50,000 shares 5,000,000
Share premium 600,000
Dividends have been paid on the preference share up to December

31, 2013.
17 September 2016
Slide 13
Illustration 2 (Cont’d)
CASE 1 - PREFERENCE SHARE IS NONCUMULATIVE AND
NONPARTICIPATING
Excess
over par Preference Ordinary
Balances P3,600,000 P2,500,000 5,000,000
Preference dividend (300,000) 300,000
Balance to common 3,300,000 3,300,000
Total shareholders’ equity 2,800,000 8,300,000

Divided by shares outstanding 25,000 50,000
Book value per share P112 P166
17 September 2016
Slide 14
CASE 2 - PREFERENCE SHARE IS CUMULATIVE AND
NONPARTICIPATING
Excess
Balances P3,600,000 P2,500,000 5,000,000

17 September 2016
Slide 15
CASE 3 - PREFERENCE SHARE IS CUMULATIVE AND PARTICIPATING
Excess
Balances P3,600,000 P2,500,000 5,000,000
Ordinary dividends (600,000) 600,000
Balance to common 2,400,000
Preference (1/3 x 2,400,000) 800,000
Ordinary (2/3 x 2,400,000) 1,600,00
17 September 2016
Slide 16
CASE 4 - PREFERENCE SHARE IS CUMULATIVE AND PARTICIPATING
UP TO 16%
Excess
Balances P3,600,000 P2,500,000 5,000,000
Preference (4% x 2,500,000) 100,000
Ordinary (balance to common) 2,300,00
17 September 2016
Slide 17
CASE 5 - PREFERENCE SHARE IS CUMULATIVE, NONPARTICIPATING
AND WITH LIQUIDATION VALUE OF P106 PER SHARE
Excess
Balances P3,600,000 P2,500,000 5,000,000
Liquidation premium (25,000sh x P6) (150,000) 150,000
Preference dividends (600,000) 600,000
17 September 2016
Slide 18
Exercise 1
Preference share capital, 12% P100 par P1,000,000

Ordinary share capital, P100 par 4,000,000
Share premium 2,000,000
Dividends have been paid on the preference share up to December

31, 2013.
17 September 2016
Slide 19
Exercise 1 (Cont’d)
REQUIRED:
Compute the book value per ordinary share and per preference
share under each of the following conditions with respect to
preference share:
1. Cumulative and fully participating
2. Cumulative and fully participating after ordinary share receives
15%
3. Cumulative and participating up to 16%
4. Cumulative and nonparticipating
5. Noncumulative and nonparticipating.
17 September 2016
Slide 20
Illustration 3
Preference share capital, 12% P100 par,

25,000 shares cumulative P2,500,000
Deficit (900,000)
No dividends have been paid on preference share since 2012.
17 September 2016
Slide 21
CASE 1 – PREFERENCE SHARE HAS PREFERENCE AS TO ASSETS
(DIVIDENDS IN ARREARS ARE FULLY PAYABLE)
Excess
Balances (P900,00) P2,500,000 P5,000,000
Preference dividend (1,200,000) 1,200,000
Balance to common (2,100,000) (2,100,000)
17 September 2016
Slide 22
CASE 2 – PREFERENCE SHARE HAS PREFERENCE AS TO DIVIDENDS
Excess
Balances (P900,00) P2,500,000 P5,000,000
Share in deficit:
Preference - 1/3 300,000 (300,000)
Ordinary - 2/3 600,000 (600,000)
Total 2,200,000 4,400,000
Divide by shares outstanding 25,000 50,000
Book value per share 88 88
17 September 2016
Slide 23
Illustration 4
Preference share capital, 12% cumulative, participating, P100 par,
50,000 shares authorized, 25,000 shares issued, of which 5,000
shares are in treasury P2,500,000
Treasury preference shares, at cost 400,000
Subscribed preference share capital, 10,000 shares 1,000,000
Subscription receivables - preference 300,000
Ordinary share capital, P50 par, 200,000 shares authorized,
90,000 shares issued, of which 10,000 shares are in treasury 4,500,000
Treasury ordinary shares, at cost 550,000
Subscribed ordinary share capital, 20,000 shares 1,000,000
Subscription receivables - ordinary 200,000
17 September 2016
Slide 24
Share premium P1,250,000
Retained earnings unappropriated 1,000,000
Retained earnings appropriated 2,500,000
Last dividend payments December 31, 2010
17 September 2016
Slide 25
Computation of share capital outstanding:
PREFERENCE ORDINARY
Amount Shares Amount Shares
Issued P2,500,000 25,000 P4,500,000 90,000
Subscribed 1,000,000 10,000 1,000,000 20,000
Total 3,500,000 35,000 5,500,000 110,000
Less: treasury at par 500,000 5,000 500,000 10,000
Outstanding P3,000,000 30,000 P5,000,000 100,000
17 September 2016
Slide 26
Adjustment to retire ordinary treasury shares and preference
treasury shares.
Preference share capital (5,000sh x 100) 500,000

Treasury preference shares 400,000
Ordinary share capital (10,000sh x 50) 500,000

Treasury ordinary shares 550,000
17 September 2016
Slide 27
Excess
Balances P4,800,000 P3,000,000 5,000,000
Preference dividend (1,800,000) 1,800,000
Preference (3/8 x 2,400,000) 900,000
Ordinary (5/8 x 2,400,000) 1,500,00
Annual dividend for preference (12% x P3,000,000 x 5) P1,800,000

Ordinary dividend (P5,000,000 x 12%) 600,000
17 September 2016
Slide 28
Illustration 5
An entity showed the following shareholders’ equity on December
31, 2015:
Preference share capital, P100 par, 50,000 shares P5,000,000

The preference dividend rate is 12% and the preference share is

cumulative and fully participating.
Dividends on the preference share are in arrears for 2014 and 2015.
On December 31, 2015, the board of directors of the entity would like
to pay the ordinary shareholders a dividend of P10 per share.
17 September 2016
Slide 29
Question:
To attain the dividend objective of the entity, how much
maximum dividend would be declared on the preference
and ordinary shares?
17 September 2016
Slide 30
Ordinary dividend for 2015 (150,000 shares x P10) P1,500,000

% of ordinary dividend (1,500,000 ÷ 7,500,000) 20%
Computation of maximum dividends
Ordinary dividend P1,500,000

Preference dividend:
2014 (12% x P5,000,000) 600,000
2015 (20% x P5,000,000) 1,000,000
Maximum dividend P3,100,000
17 September 2016
Slide 31
Proof:
Dividend Preference Ordinary
Maximum dividend P3,100,000
Preference dividends:
2014 (600,000) P600,000
2015 (600,000) 600,000
Ordinary dividend for 2015 using the
preference rate (12% x 7,500,000) (900,000) P900,000
Balance for participation 1,000,000
Preference (50/125 x P1,000,000) 400,000
Ordinary (75/125 x P1,000,000) 600,000
Maximum dividend P1,600,000 P1,500,000
17 September 2016
Slide 32
Basic earnings per share
 Definition and formula
 Uses of earnings per share
 Determination of weighted average
 Bonus issue and rights issue
 Presentation

2
17 September 2016
Slide 33
Definition
 The amount attributable to every ordinary share
outstanding during the period
 Pertains to ordinary shares
 Not necessary for preference; definite rate of return
 Two presentation under PAS 33:
1. Basic earnings per share
2. Diluted earnings per share
Required for publicly-traded entities or in the process of
issuing ordinary shares or potential ordinary shares in the
public securities market; not required for nonpublic
entities but encouraged
17 September 2016
Slide 34
Definition (Cont’d)
 Equity instrument - residual interests in the assets after
deducting liabilities
 Potential ordinary share - financial instrument or other
contract that may entitle its holder to ordinary share
 Financial instrument - any contract that gives rise to both
a financial asset of one entity and a financial liability or
equity instrument of another entity
 Warrants or options - financial instruments that give the
holder the right to purchase ordinary shares
17 September 2016
Slide 35
Formula
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝐵𝑎𝑠𝑖𝑐 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 =
𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
• Net income - after deducting dividends on preference shares

• Preference share is cumulative - current year only is
deducted, whether dividends are declared or not
• Preference share is noncumulative - current year only is
deducted if there is only dividend declaration
• If there is significant change during the year - weighted
average number of ordinary share capital is the denominator
17 September 2016
Slide 36
Illustration 6
An entity provided the following information for the current year:
Preference share capital, P100 par, 10% cumulative P1,000,000
Income from continuing operations P1,500,000

Income form discontinued operations 500,000
Net income P2,000,00
Required:
Compute for the earnings per share.
17 September 2016
Slide 37
Computation:
Income from continuing operations P1,500,000
Preference dividend for current year (10% x P1,000,000) (100,000)
Income from continuing operations (P1.4mil. ÷ 50,000sh) P28

Income from discontinued operation (P0.5mil. ÷ 50,000sh) 10
Net income P38
17 September 2016
Slide 38
Uses of earnings per share
• Determinant of market price of ordinary shares
(attractiveness of the ordinary share as an investment)
• Measure of performance
• Basis of dividend policy
17 September 2016
Slide 39
Illustration 7
An entity had the following capital structure at the end of the
current year:
Preference share capital, P100 par, 40,000 shares
issued and outstanding P2,000,000
Ordinary share capital, P50 par, 80,000 shares issued
and outstanding 8,000,000
Net income for the year 3,000,000
The preference dividend rate is 10% and the preference share is
nonconvertible but cumulative and fully participating.
Dividends paid to ordinary shareholders is P20 per share.
17 September 2016
Slide 40
Preference Ordinary
Basic dividend:
Preference (10% x P2,000,000) P200,000
Ordinary (80,000 x P20) P1,600,000
Balance for participation 240,000 960,000
Total dividends P440,000 P2,560,000
Basic dividend (P200,000 + P1,600,000) (1,800,000)
Balance for participation P1,200,000
Preference share (P440,000 ÷ 40,000 shares) P11
Ordinary share (P2,560,000 ÷ 80,000 shares) 32
17 September 2016
Slide 41
Determination of weighted
average
• Ordinary shares in exchange for cash are included when cash is
receivables.
• Ordinary shares issued as a result of the conversion of a debt
instrument to ordinary shares are included from the date that
interest ceases to accrue.
• Ordinary shares issued in place of interest or principal on other
financial instruments are included form the date that interest
ceases to accrue.
• Ordinary shares issued in exchange for the settlement of a
liability of the entity are included from the settlement date.
• Ordinary shares issued as a consideration for the acquisition of
an asset other than cash are included as of the date on which
the acquisition is recognized.
17 September 2016
Slide 42
average (Cont’d)
• Ordinary shares issued for the rendering of services to the entity
are included as the services are rendered.
• Ordinary shares issued as part of the purchase consideration of
a business combination that is an acquisition are included in the
weighted average number of shares from the date of
acquisition.
• Ordinary shares that will be issued upon the conversion of a
mandatory convertible instrument are included in the
calculation of basic earnings per share from the date the
contract entered into.
• In the case of a stock dividend or a share split, ordinary shares
are issued to existing shareholders for no additional
consideration.
17 September 2016
Slide 43
average (Cont’d)
The number of ordinary shares outstanding before the event is
adjusted for the proportionate change in the number of
ordinary shares outstanding as if the event had occurred at the
beginning of the earliest period reported.
• Subscribed ordinary shares or partly paid shares are included in
EPS to the extent that they are entitled to participate in
dividends. (Corporation Code of the Philippines - entitled to
participate fully in dividends; the law prevails)
17 September 2016
Slide 44
Illustration 8
January 1 Beginning balance 100,000 shares

May 1 Additional issuance 150,000 shares
September 1 Additional issuance 150,000 shares
Total shares outstanding 400,000 shares
17 September 2016
Slide 45
(a) (b) (a x b)
Date Shares Months Peso month
outstanding
Jan. 1 100,000 12 P1,200,000
May 1 150,000 8 1,200,000
Sep. 1 150,000 4 600,000
3,000,000
Average share (P3,000,000 ÷ 12) 250,000 shares
17 September 2016
Slide 46
ANOTHER APPROACH:
Date Shares Fraction Average shares

Jan. 1 100,000 12/12 100,000
May 1 150,000 8/12 100,000
Sep. 1 150,000 4/12 50,000
250,000
17 September 2016
Slide 47
Illustration 9
January 1 Beginning balance 100,000 shares

March 1 Issued for cash 50,000 shares
July 1 20% stock dividend 30,000 shares
November 1 Treasury shares (15,000 shares)
Total shares outstanding 165,000 shares
17 September 2016
Slide 48
(a) (b) (a x b)
Date Shares Mos. outstading Peso month
Jan. 1 120,000 12 P1,440,000
Mar. 1 60,000 10 600,000
Nov. 1 (15,000) 2 (30,000)
2,010,000
Average share (P2,010,000 ÷ 12) 167,500 shares
17 September 2016
Slide 49
ANOTHER APPROACH:

Jan. 1 120,000 12/12 120,000
Mar. 1 60,000 10/12 50,000
Nov. 1 (15,000) 2/12 (2,500)
167,500
17 September 2016
Slide 50
Illustration 10
January 1 100,000 shares issued and outstanding

April 1 Issued 50,000 new shares
June 1 Share split 2 for 1
July 1 Purchased 20,000 treasury shares
October 1 20% stock dividends
December 31 Share split 5 for 1
17 September 2016
Slide 51
(a) (b) (a x b)
Date Shares Mos. outstading Peso month
Jan. 1 1,200,000 12 P14,400,000
Mar. 1 600,000 9 5,400,000
Nov. 1 (120,000) 6 (720,000)
19,080,000
Average share (P19,080,000 ÷ 12) 1,590,000 shares
17 September 2016
Slide 52
ANOTHER APPROACH:

Jan. 1 1,200,000 12/12 1,200,000
Apr. 1 600,000 9/12 450,000
Jul. 1 (120,000) 6/12 (60,000)
1,590,000
17 September 2016
Slide 53
Bonus issue
• Ordinary shares are issued to existing shareholders for no
consideration.
• Stock dividend
• Adjusted proportionate for the proportionate change in the
number of ordinary shares outstanding as if occurred at the
beginning of the year
17 September 2016
Slide 54
Illustration 11
Net income - 2015 7,200,000

Net income – 2016 6,000,000
Ordinary share outstanding on January 1, 2015 200,000
On October 1, 2016, the entity implemented a bonus issue of
ordinary shares in the ratio of two ordinary shares for each ordinary
share.
17 September 2016
Slide 55
Rights issue
• Exercise price is less than the fair value of the shares
• Include a bonus element - no consideration
• Stock right or right of preemption
• Adjustment factor is the ratio of the market value of the right-on
to the theoretical market value of the share ex-right
• Market value of the share right-on - market value of the share
immediately prior to the exercise of rights.
• Problem - if ex-right
• Market value of the share ex-right – total market value of the
shares outstanding plus the proceed from the exercise of rights
divided by the number of shares outstanding after the exercise
of rights
17 September 2016
Slide 56
Diluted earnings per share
 Concept of dilution
 Potential ordinary shares
 Procedures for treasury share method
 Multiple potential ordinary share

3
17 September 2016
Slide 57
Illustration 14
An entity had the following securities outstanding at the beginning
of the current year:
10% convertible bonds payable, each P1,000 bond
convertible into 10 ordinary shares P4,000,000
Ordinary share capital, P100 par, 250,000 shares
authorized, 100,000 shares issued 10,000,000
Net income 5,000,000
Income tax rate 30%
Assume that the convertible bond payable is issued on April 1 of the

current year. In this case, all conversion computations will be made
for nine months only, from April 1 to December 31 of the current
year.
17 September 2016
Slide 58
Illustration 15
10% convertible bonds payable, each P1,000 bond
convertible into 10 ordinary shares P4,000,000
Income tax rate 30%
All of the bonds were converted into ordinary shares on October 1 of

the current year.
17 September 2016
Slide 59
Illustration 16
10% convertible cumulative preference share capital ,
P100 par, 30,000 shares - one preference share is
convertible into two ordinary shares P3,000,000
17 September 2016
Slide 60
Illustration 17
Preference share capital – 10%, 50,000 shares, P100
par, cumulative and convertible into 100,000
ordinary shares P5,000,000
The preference shares were all converted into ordinary shares on

October 1 of the current year.
The preference dividends for the entire year were paid in full before
the conversion.
17 September 2016
Slide 61

Book Value Per Share Basic Earnings Per

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UNOR - College of Business and Accountancy

𝑇𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

Share capital, P100 par, 50,000 shares P5,000,000

𝑇𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

= 𝑃190 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦

The preference shareholders are entitled to

If dividends are declared, the preference

Preference share capital, 12% P100 par, 25,000 shares P2,500,000

Dividends have been paid on the preference share up to December

Total shareholders’ equity 2,800,000 8,300,000

Total shareholders’ equity 3,100,000 8,000,000

Preference share capital, 12% P100 par P1,000,000

Dividends have been paid on the preference share up to December

Preference share capital, 12% P100 par,

No dividends have been paid on preference share since 2012.

Preference share capital (5,000sh x 100) 500,000

Ordinary share capital (10,000sh x 50) 500,000

Annual dividend for preference (12% x P3,000,000 x 5) P1,800,000

Preference share capital, P100 par, 50,000 shares P5,000,000

The preference dividend rate is 12% and the preference share is

Ordinary dividend for 2015 (150,000 shares x P10) P1,500,000

Computation of maximum dividends

Ordinary dividend P1,500,000

UNOR - College of Business and Accountancy

• Net income - after deducting dividends on preference shares

Income from continuing operations P1,500,000

Basic earnings per share

Income from continuing operations (P1.4mil. ÷ 50,000sh) P28

January 1 Beginning balance 100,000 shares

Average share (P3,000,000 ÷ 12) 250,000 shares

Date Shares Fraction Average shares

January 1 Beginning balance 100,000 shares

Average share (P2,010,000 ÷ 12) 167,500 shares

Date Shares Fraction Average shares

January 1 100,000 shares issued and outstanding

Average share (P19,080,000 ÷ 12) 1,590,000 shares

Date Shares Fraction Average shares

Net income - 2015 7,200,000

UNOR - College of Business and Accountancy

Assume that the convertible bond payable is issued on April 1 of the

All of the bonds were converted into ordinary shares on October 1 of

The preference shares were all converted into ordinary shares on

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