Question

Tropic Dream Inc. (TDI) was incorporated on January 1, 2018. At that time, it issued 100,000 ordinary shares; 90,000, $20, 6% preferred shares "A"; and 80,000, $20, 7% preferred shares "B." Net income for the year ended December 31, 2018, was $1,000,000. TDI declares and pays a total of $168,000 in dividends. The following are three independent situations. (Click the icon to view the independent situations.) Required For each of these three independent situations, compute basic EPS. Select the formula and enter the amounts to compute Tropic Dream's basic EPS for each independent situation. (Abbreviations used: WASO = Weighted average number of ordinary shares outstanding; WAPSO = Weighted average number of preferred shares outstanding. Round the earnings per share [EPS] to the nearest cent, $X.XX.) Net income available to ordinary shareholders 1 WASO Basic EPS i. 1 100000 ii. 832000 1 100000 8.32 iii. 832000 1 100000 8.32 = Independant situations i. Both the preferred shares Series A and B are cumulative in nature. Series A shareholders must be fully paid their current entitlement as well as any arrears before any monies are paid to the Series B shareholders. ii. The Series A preferred shares are cumulative, and the Series B preferred shares are non-cumulative. Series A shareholders must be fully paid their current entitlement before any monies are paid to the Series B shareholders. iii. Both the preferred shares Series A and B are non-cumulative in nature. Series A shareholders must be fully paid their current entitlement before any monies are paid to the Series B shareholders. Choose fron All parts sho Check Answer

Answer 1

Part 1	$                7.80
Preferred dividends to A (90000*20*6%)	$         108,000
Preferred dividends to B (80000*20*7%)	$         112,000
Total Preferred dividends	$         220,000
Net income	$      1,000,000
Less: preferred dividends (both are cumulative and considered)	$         220,000
Income available for ordinary shareholders	$         780,000
Divided by: WASO	100,000
Basic EPS	$                7.80
Part 2	$                8.32
Preferred dividends to A paid first (90000*20*6%)	$         108,000
Preferred dividends to B (paid after the preferred A and Nature of Preferred B is non-cumulative. It means they did not received full amount of dividend) (168000-108000)	$            60,000
Total Preferred dividends	$         168,000
Net income	$      1,000,000
Less: preferred dividends	$         168,000
Income available for ordinary shareholders	$         832,000
Divided by: WASO	100,000
Basic EPS	$                8.32
Part 3	$                8.32
Preferred dividends to A paid first (90000*20*6%)	$         108,000
Preferred dividends to B (It means they did not received full amount of dividend) (Remaining: 168000-108000)	$            60,000
Total Preferred dividends	$         168,000
Net income	$      1,000,000
Less: preferred dividends	$         168,000
Income available for ordinary shareholders	$         832,000
Divided by: WASO	100,000
Basic EPS	$                8.32