Quiz Reviewer With Solution On Ias 33 - Earnings Per Share

IAS 33- EARNINGS PER SHARE QUIZ REVIEWERBASIC EARNINGS PER SHARESimple ProblemsPROBLEM 1 (AICPA Adapted)On December 31,2019 and 2018, Wow Company had 100,000 ordinary shares and 10,000 cumulative preference shares of 5%, P100 par value. No dividends were declared on either the preference or ordinary shares in 2019 or 2018. Net income for the current year was P900,000. What amount should be reported as basic earnings per share?8.509.509.005.00Answer. A. 8.50Preference share capital (10,000 x P100) 1,000,000Net income. 900,000Preference dividends (1,000,000 x 5%) (50,000)Net income to ordinary shares. 850,000BASIC EARNINGS PER SHARE (850,000/100,000 ordinary shares) P8.50Whether cumulative or noncumulative, only one year preference dividend is deducted from net income. If cumulative, the preference dividend is deducted regardless of declaration.If noncumulative, the preference dividend is deducted only when declared.PROBLEM 2(AICPA Adapted) Blue Company reported the ff. capital structure on Jan. 1, 2019:Shares issued and outstandingOrdinary share capital 200,000Preference share capital. 50,000On October 1, 2019, the entity issued 10% share dividends on ordinary shares and declared the annual cash dividend of P200,000 on preference shares. The preference shares are noncumulative, nonparticipating and nonconvertible.Net income for the year ended December 31,2019 was