BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

BOOK VALUE PER SHARE

One class of shares
1. Ordonez Co.’s shareholder’s equity at year-end of the following:

Share capital, ₱10 par, 100,000 shares issued 1,000,000

Subscribed share capital 500,000
Share premium 370,000
Subscription receivable (200,000)
Retained earnings 660,000
Revaluation surplus 140,000
Cumulative translation losses on foreign
(100,000)
operation
Treasury shares, at cost, 10,000 shares (70,000)
Total shareholders’ equity 2,300,000

How much is the book value per share?

Two classes of shares- Cumulative preference shares
2. The shareholders’ equity of Carino Co. as of year-end consisted or the following:
Preference share, 10% cumulative, ₱100 par, 20,000 shares 2,000,000
Ordinary share, ₱10 par, 100,00 shares issued 1,000,000
Retained earnings 820,000

Dividends are in arrears for three years.

Required:
a. How much is the book value per preference share?
b. How much is the book value per ordinary share?

Cumulative preference shares- with liquidation value

3. The shareholders’ equity of Datugan Co. as of year-end consisted of the following:

Preference share, 10% cumulative, ₱100 par, 20,000 shares,

2,000,000
liquidation value of ₱120 per share
Ordinary Share, ₱10 par, 100,000 shares issued 1,000,000
Retained earnings 820,000

Dividends are in arrears for three years. How much is the book value per ordinary share?

Non-cumulative preference shares

4. The shareholders’ equity of Ordanez Co. as of the year-end consisted of the following:

Preference share, 10% non-cumulative, ₱100 par, 20,000

2,000,000
shares
Ordinary Share, ₱10 par, 100,000 shares issued 1,000,000
Retained earnings 820,000

Dividends are arrears for three years. How much is the book value per ordinary share?

Noncumulative preference shares – no dividends in arrears

5. The shareholders equity of Ramos Co. as of the year-end consisted of the following:

Preference share, 10% non-cumulative, ₱100 par,

2,000,000
20,000 shares

Albert I. Rivera, CPA, MBA, CRA 1 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

Ordinary Share, ₱10 par, 100,000 shares issued 1,000,000

Retained earnings 820,000

How much is the book value per ordinary share?

Participating preference shares

6. The shareholder’s equity of Bigornia Co as of year ended consisted the following:
Preference share, 10% cumulative & fully participating
2,000,000
₱100 par, 20,000 shares
Ordinary Share, ₱10 par, 100,000 shares issued 1,000,000
Retained earnings 820,000

Dividends are in arrears for three years.

Required:
a. How much is the book value per preference share?
b. How much is the book value per ordinary share?

Participating preference shares- two types of preference shares

7. The shareholders’ equity of Alejo Co.as year-end consisted of the following:

10% Preference share, cumulative, fully participating at

2,000,000
₱100 par, 20,000 shares
8% Preference share, noncumulative, fully participating
200,000
at ₱80 par, 2,500 shares
Ordinary share, ₱10 par, 100,000 shares issued and
1,000,000
outstanding
Retained earnings 820,000
Total shareholders’ equity 4,020,000

Dividends are in arrears for the three years.

Required:
a. How much is the book value per 10% preference share?
b. How much is the book value per 8% preference share?
c. How much is the book value per ordinary share?

Basic earnings per share- Cumulative preference shares

8. Bragais Co. has the following capital structure during 20x1 and 20x2

Preference shares, ₱10 par, 6% cumulative, 50,000 shares

₱500,000
issued and outstanding
Ordinary shares, ₱10 par, 200,000 shares issued and
2,000,000
outstanding

Bragais reported profit after tax of ₱1,200,000 for the year ended December 31, 20x2. Bragais paid no
preferred dividends during 20x1 and paid ₱15,000 in preferred dividends during 20x2.

In its December 31,20x2 statement of profit or loss, what amount should Bragais repost as basic earnings
per share?

Basic earnings per share- Non-cumulative preference shares

9. Torrato reported for the year amounting to ₱1,000,000. Torrato Co. has the following equity
instruments:

Albert I. Rivera, CPA, MBA, CRA 2 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

a. 10,000, 10% cumulative preference shares issued and outstanding with par value of ₱100 per
share.
b. 20,000, 5% non-cumulative preference share issued and outstanding with par value of ₱20 per
share
c. 11,000 ordinary shares issued and outstanding within par value of ₱5 per share

Torrato CO. declared the following dividends during the year:

a. 150,000 to cumulative preference shares;
b. 25,000 to non-cumulative shares; and
c. 27,500 to ordinary shares

Dividends in arrears on cumulative preference share as of the beginning of the year amounted to 200,000.
There were no issuances or acquisitions of ordinary shares during the period. How much is the basic
earnings per share for the period?

Profit or loss – Unusual and infrequent items

10. During 20x1, AIR Co. had the following two classes of shares issued and outstanding for the entire year:

1,000,12%, redeemable preference shares, ₱100 par ₱100,000

100,000 ordinary shares,₱10 par 1,000,000

During 20x1, AIR Co.’s income statement reported profit of P2,500,000. An expropriation loss of P200,000
had been deducted from the profit for the year. AIR Co.’s income tax rate is 30%.

Required:
a. In computing for basic earnings per share for 20x1, what amount of earnings should be used?
b. How much is the basic EPS for the year?

Profit or loss – Redeemable preference shares

11. During 20x1, JAVELLONAR Co. had the following two classes of shares issued and outstanding for the
entire year:

1,000,12%, redeemable preference shares, ₱100 par ₱100,000

100,000 ordinary shares,₱10 par 1,000,000

During 20x1, JAVELLONAR declared dividends of ₱60,000 and ₱90,000 to preference shares and ordinary
shares, respectively. JAVELLONAR’s 20x1 income statement reported profit of ₱2,500,000. JAVELLONAR’s
income tax rate is 30%. How much is the basic earnings per share in 20x1?

Participating preference shares

12. BERMAS Co. had the following share capital outstanding all throughout 20x1:

10% Preference shares, ₱40 par, 50,000 share issued and outstanding 2,000,000
Ordinary shares, ₱10 par,100,000 shares issued and outstanding 1,000,000

Additional information:
 The preference shares are non-convertible but are cumulative and fully participating
 BERMAS Co. reported profits of ₱1,200,000 for 20x1 and declared ₱800,000 dividends on
December 31, 20x0. There are no dividends in arrears on 31 December 20x0.

Required:
a. Compute for the basic EPS for preference shares?
b. Compute for the basic EPS for ordinary shares?

Weighted average number of outstanding ordinary shares

13. OBIS Co. had the following ordinary share transactions during the current year:
Jan. 1 Ordinary shares outstanding 200,000

Albert I. Rivera, CPA, MBA, CRA 3 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

Feb. 1 Issued a 10% bonus issue (share dividends) 20,000

May. 1 Acquired treasury shares 12,000
June. 1 Issued shares in a business combination 60,000
Aug. 1 Issued shares for cash 30,000
Sept.1 Issued a 2-for1 share split
Dec. 1 Reissued treasury shares 6,000

OBIS reported profit of 11,429,000 during the year. How much is the basic earnings per share to be
disclosed prominently in OBIS’s 20x1 income statement?

Restatement of prior year’s EPS

14. AIR Co. had one class of share capital outstanding and no other securities that are potentially
convertible into ordinary shares. In 20x1, AIR reported EPS of P72 on its 100,000, ordinary shares
outstanding.

In 20x2, three distribution of additional ordinary shares occurred

a. On 1 April, a 10% bonus issue (share dividend) was declared
b. On 1 July, 10,000 treasury shares were sold.
c. On 1 September, a 2-for-1 share split was issued

Reported profits were P7,200,000 and P9,250,000 in 20x1 and 20x2, respectively.
Required:
a. Compute for the weighted average number of ordinary shares in 20x1?
b. Compute for the weighted average number of ordinary shares in 20x2?
c. Compute for the adjusted basic EPS in 20x1?
d. Compute for the basic EPS in 20x2?

Rights exercised during the period

15. AIR Co. had 100,000 ordinary shares outstanding throughout 20x0. On 1 January 20x1, AIR issued
100,000 rights to acquire one ordinary share at P50 in the ratio of 1 new share for every 5 rights held.
The market price of 1 ordinary share immediately before exercise on 1 April 20x1 is P110. AIR reported
the following profits:

Year Profit
20x0 900,000
20x1 1,000,000
20x2 1,200,000

Required:
a. Compute for the basic EPS in 20x0?
b. Compute for the basic EPS in 20x1?
c. Compute for the basic EPS in 20x2?

Increasing rate preference shares

16. On 1 January 20x1, ABC issued 10,000 non-convertible, non-redeemable, Class A cumulative
preference shares with par value of P100 per share. The shares were issued at P89 per share, i.e. at a
discount of P11 per share. The difference shall be compensated by the non-declaration of dividends on
the preference shares within the next 2 years. The Class A preference shares will be entitle to
cumulative dividends of 6% per annum starting only on 1 January 20x3.

ABC has 100,000 outstanding ordinary shares all throughout 20x1 to 20x3. ABC reported the following
profits:

Year Profit
20x1 1,000,000
20x2 1,200,000

Albert I. Rivera, CPA, MBA, CRA 4 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

20x3 1,500,000

ABC declared dividends on the preference shares in 20x3.

Required:
a. Compute for the basic EPS in 20x1?
b. Compute for the basic EPS in 20x2?
c. Compute for the basic EPS in 20x3?

Diluted EPS – Convertible preference shares

17. CORTEZ Co. had the following capital structure during 20x1 and 20x2:

Convertible preference shares ₱10 par 6% cumulative,50,000 shares 500,000

issued and outstanding
Ordinary shares, ₱10 par, 200,000 shares issued and outstanding 8,000,000

CORTEZ reported profit after tax of ₱1,200,000 for the year ended December 31, 20x2. CORTEZ paid
no preferred dividends during 20x1 and paid 15,000 in preferred dividends during 20x2. Each
preference share is convertible into two ordinary shares.

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Diluted EPS greater than EPS

18. On December 31,20x1, TINAMBUNAN ENROLL Co. had 200,000 ordinary shares outstanding with a par
value of ₱100 per share. In addition, TINAMBUNAN had convertible preference shares which are
convertible into 30,000 ordinary shares, On December 31,20x1, TINAMBUNAN reported profit of
₱1,200,000 and paid ₱200,000 dividends to preference shares.

What amounts of earnings per share should TINAMBUNAN Company report in its December 31, 20x1
statement of profit or loss?

Diluted EPS- Convertible bonds

19. MARTINEZ Co. had the following instrument outstanding all throughout 20x1:

10% convertible bonds payable issued at face amount, each ₱1,000

bond is convertible into 30 ordinary shares 4,000,000
Ordinary shares, ₱10 par, 200,000 shares issued and outstanding 2,000,000

Profit for the year amounted to ₱1,200,000. MARTINEZ income tax rate is 30%
Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Diluted EPS – Bonds actually converted during the period

20. MANALAC Co. had 200,000 ordinary shares outstanding on January 1, 20x1. In addition, as of January
1, 20x1, the entity had issued 5,000 convertible 10% bonds with ₱1,000 face amount. The bonds are
convertible into 100,000 ordinary shares. MANALAC has no other potentially dilutive securities. The
bonds were converted on October 1, 20x1. Profit for the year was ₱1,200,000. Income tax rate is 30%.

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Albert I. Rivera, CPA, MBA, CRA 5 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

Diluted EPS – Convertible bonds issued during the period

21. CASTRO Co. had 200,000 ordinary shares outstanding on January 1, 20x1. On July 1, 20x1, CASTRO
issued 5,000 convertible 10% bonds with ₱1,000 face amount. The bonds are convertible into 100,000
ordinary shares. CASTRO has no other potentially dilute securities. Profit for the year was ₱1,200,000.
Income tax rate is 30%

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Diluted EPS – Effective interest menthod

22. ABC had 200,000 ordinary shares on 1 Jan 20x1. Also on 1 Jan 20x1, ABC issued P1,000,000 face amount
convertible bonds with face rate of 10% due in 3 years. Without the conversion option, the bonds are
selling at a market rate of interest of 12%. The bonds are convertible into 50,000 ordinary shares. Profit
for 20x1 is P1,200,000. Income tax rate is 30%

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Diluted EPS – Non-convertible preference shares

23. Torrato reported for the year amounting to ₱1,000,000. Torrato Co. has the following equity
instruments:

a. 10,000, 10% cumulative preference shares issued and outstanding with par value of ₱100 per share.
b. 20,000, 5% non-cumulative preference share issued and outstanding with par value of ₱20 per share
c. 11,000 ordinary shares issued and outstanding within par value of ₱5 per share

In addition to the above instruments, Torrato has outstanding convertible bonds with face amount of
P1,000,000 and carrying amount of P951,963 as of beginning of the year. the nominal rate of the bonds
is 10% while the original effective interest rate is 12%. The bonds are convertible inot 50,000 ordinary
shares. ABC’s income tax rate is 30%.

Torrato declared the following dividends during the year:

a. 150,000 to cumulative preference shares;
b. 25,000 to non-cumulative shares; and
c. 27,500 to ordinary shares

Dividends in arrears on cumulative preference share as of the beginning of the year amounted to
P200,000. There were no issuances or acquisitions of ordinary shares during the period.

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Options outstanding the entire year

24. AIR has the following information for the entire year

Profit after tax P1,000,000

Outstanding ordinary shares, P1 par 100,000

Employee stock options outstanding during the entire year:

Option shares 10,000

Exercise price 140
FV of each share option 10
Average market price 200

Albert I. Rivera, CPA, MBA, CRA 6 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

Ending market price at year-end 300

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Options issued during the year

25. On 1 Jul 20x1, AIR issued options to its employees with the following information:

Weighted average number of unvested share options 10,000

Weighted average to be recognized over the remainder of the vesting period P100,000
for employee services to be rendered as consideration for the share options,
determined in accordance with PFRS 2 Share-based Payment
Cash exercise price of unvested share options P140
Average market price 200

Total outstanding ordinary shares as of 1 January 20x1 is 100,000. AIR reported profits of P1,000,000
in 20x1.

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Treasury share method – Options actually exercised

26. AIR had the following information as of 1 January 20x1:

Ordinary shares outstanding 100,000

Option shares 10,000
Total exercise price P150

On 1 October 20x1, the option shares wre actually exercised. As of this date, the following
information were determined:

Average market price P200

Market price on 1 Oct 20x1 P250

ABC reported profit of P1,000,000 for 20x1.

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Bonds settled in shares or cash – settlement at the issuer’s option

27. On 1 January 20x1, AIR issued a 3-year, 12%, P1,000,000 face amount convertible bonds or P1,150,000.
The bonds are due at maturity but interest is due annually every December 31. The bonds are
convertible into 50,000 ordinary shares. At maturity, ABC has the option to settle the principal amount
of the bonds in shares or in cash. When the bonds are issued, the prevailing interest rate is 10% for
similar bonds without the conversion feature. Additional information are as follows:

Profit for the year P2,000,000

Outstanding shares throughout the year 100,000
Income tax rate 30%

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Albert I. Rivera, CPA, MBA, CRA 7 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

Basic Loss Per Share

28. AIR had the following capital structure during 20x1 and 20x2:

Convertible preference shares, P10 par, 6% cumulative, 50,000 P500,000

shares issued and outstanding
Ordinary shares, P10 par, 200,000 shares issued and outstanding 2,000,000

AIR reported loss of P1,200,000 for the year ended 31 December 20x2. AIR paid no preferred
dividends during 20x1. Each preference share is convertible into 2 ordinary shares.

Required:
a. How much is the basic loss per share?
b. How much is the diluted loss per share?

Multiple potential ordinary shares

29. AIR has the following information for 20x1:

Profit from continuing operations 1,900,000

Dividends on preference shares (900,000)
Profit from continuing operations attributable to ordinary equity holders 1,000,000
Loss from discontinued operations (200,000)
Profit for the year attributable to ordinary equity holders 800,000
Other comprehensive income 400,000
Total comprehensive income 1,200,000

Additional information:
a. AIR had 100,000 ordinary shares outstanding all throughout the year.
b. AIR had the following potential ordinary share:
 Options, 10,000, with exercise price o f P150. The average market price during the year is
P200.
 Preference shares, P100 par, 50,000 shares outstanding, entitle to a cumulative dividend of
P18 per share. Each preference share is convertible into 2 ordinary shares
 12% convertible bonds with face amount of P1,000,000 and carrying amount of P1,075,816
on 1 January 20x1. The original effective interest rate on the bonds is 10%. Each P1,000
bonds is convertible into 40 ordinary shares
 AIR’s income tax rate is 30%.

Required:
a. How much is the basic earnings/loss per share?
b. How much is the diluted earnings/loss per share?

Contingently issuable shares

30. AIR had 1,000,000 outstanding ordinary shares all throughout 20x1. An agreement related to a recent
business combination provides for the issue of additional ordinary shares based on the following
conditions:
a. 5,000 additonal ordinary shares for each retail outlet opened during 20x1
b. 1,000 additional ordinary shares for each P1,000 profit in excess of P2,000,000 for the year
ended 31 Dec 20x1
During the year, the company opened 2 retail outlets – one on 1 May 20x1 and one on 1 Sep 20x1. AIR
earned the following year-to-date after tax profits during the year:

Quarter Profit Remarks

1 1,100,000
2 2,300,000
3 1,900,000 Including P450,000 loss from
discontinued operations
4 2,900,000

Albert I. Rivera, CPA, MBA, CRA 8 of 9

BOOK VALUE PER SHARE_EARNINGS PER SHARE AiRnotes2020

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earning per share for the 1st to 4th quarters in 20x1 ?

Partly paid shares

31. AIR had 100,000 ordinary shares outstanding as of 1 Jan 20x1. On 3 Jan 20x1, AIR received subscription
for 50,000 ordinary shares at a subscription price of P150 per share. AIR received 50% of the
subscription price on 3 Jan 20x1.

The subscribed shares remained to be only 50% paid up during the entire year. The dividend
participation of the partly paid shares is 50% until they are fully paid up. AIR reported profit of
P1,000,000 for 20x1. The average market price of the shares during the year is P200.

Required:
a. How much is the basic earnings per share?
b. How much is the diluted earnings per share?

Albert I. Rivera, CPA, MBA, CRA 9 of 9