An Excerpt From The Statement Of Financial Position Of

An excerpt from the statement of financial position of Sunland Limited follows:

SUNLAND LIMITED
Selected Statement of Financial Position Information
At December 31, 2020
Long-term debt
	Notes payable, 10%		$5,166,000
	4% convertible bonds payable		2,180,000
	6% convertible bonds payable		3,204,000
		Total long-term debt	$10,550,000

Shareholders’ equity
	$0.73 cumulative, no par value, convertible preferred shares (unlimited number of shares authorized, 544,900 shares issued and outstanding)		$2,724,500
	Common shares, no par value (7,768,400 shares authorized, 2,853,000 shares issued and outstanding)		26,606,000
	Contributed surplus		203,700
	Retained earnings		6,605,000
		Total shareholders’ equity	$36,139,200

Notes and Assumptions
December 31, 2020

1.		Options were granted/written in 2019 that give the holder the right to purchase 96,600 common shares at $8 per share. The average market price of the company’s common shares during 2020 was $14 per share. The options expire in 2028 and no options were exercised in 2020.
2.		The 4% bonds were issued in 2019 at face value. The 6% bonds were issued on June 1, 2020, at face value. Each bond has a face value of $1,000 and is convertible into 100 common shares.
3.		The convertible preferred shares were issued at the beginning of 2020. Each share of preferred is convertible into one common share.
4.		The average income tax rate is 25%.
5.		The common shares were outstanding during the entire year.
6.		Preferred dividends were not declared in 2020.
7.		Net income was $2,574,000 in 2020.
8.		No bonds or preferred shares were converted during 2020.

Calculate the income effect of the dividends on preferred shares.

Dividends on preferred shares

Calculate basic earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.)

$Enter your answer in accordance to the question statement

Determine an incremental per share effect for $0.73 preferred shares. (Round answer to 2 decimal places, e.g. 15.25.)

Potentially dilutive security

Incremental
Numerator Effect

Incremental
Denominator Effect

EPS

$0.73 Preferred shares

$Enter your answer in accordance to the question statement

Calculate the proceeds from assumed exercise of 96,600 options.

Proceeds from exercise of options

Calculate the incremental shares oustanding upon the exercise of options.

The incremental shares oustanding upon the exercise of options

Calculate the after-tax interest paid on the 4% bonds.

After-tax interest on 4% bonds converted

$Enter your answer in accordance to the question statement

Determine an incremental per share effect for 4% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security

Incremental
Numerator Effect

Incremental
Denominator Effect

EPS

4% Bonds

Calculate the after-tax interest paid on the 6% bonds.

After-tax interest on 6% bonds converted

Determine an incremental per share effect for 6% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
6% Bonds		$				$

eTextbook and Media

Rank the potentially dilutive securities from most dilutive to least dilutive.

4% Bonds		Rank 1Rank 2Rank 3Rank 4Anti-dilutive
6% Bonds		Rank 1Rank 2Rank 3Rank 4Anti-dilutive
$0.73 Preferred shares		Rank 1Rank 2Rank 3Rank 4Anti-dilutive
Options		Rank 1Rank 2Rank 3Rank 4Anti-dilutive

eTextbook and Media

Calculate diluted earnings per share for 2020. (Round earnings per share to 2 decimal places, e.g. 15.25.)

	Numerator	Denominator	EPS
Basic	$		$
4% bonds6% bondsOptionsPreferred shares
Sub Total
4% bonds6% bondsOptionsPreferred shares
Sub Total
4% bonds6% bondsOptionsPreferred shares
Sub Total
4% bonds6% bondsOptionsPreferred shares
	$		$

Diluted EPS

Notes and Assumptions