ACCOUNTING FOR LEASES

1. October 1, 2020, Chad Company enters into a 10 month cancellable lease.

The contract amounting to P800, 000 shall be paid into equal installments on
October 1, 2020 and March 1, 2021. The present value of the March 1, 2021
payment applying current rates is P749, 067.
The initial measurement of the lease liability is
2. Klyde Company enters into a 10-year lease of a floor of John Company's
building to commence on January 1, 2020. Lease payments are P60, 000 per
year, all payable at the beginning of each year. To obtain the lease, Klyde
Company incurs initial direct costs of P25, 000, of which P18, 000 relates to a
payment to a former tenant occupying that floor of the building and P7, 000
relates to a commission paid to the real estate agent that arranged the lease.
As an incentive to Klyde Company for entering into the lease, John Company
agrees to reimburse Klyde Company for the real estate commission of 5,000
and Klvde Company's leasehold improvements of P7.000. The implicit rate of
the lease readily determined by Klyde Company was 8%.
a. The initial measurement of the lease liability is
b. The initial measurement of the right-of-use asset is
3. Wynn Company leases from More Company a piece of equipment to start on
January 1, 2021. The non-cancelable lease contract shall be for five years, at
a fixed rate of P1 50,000 annually for the first three years and P200,000
annually for the remaining term of the contract.
Direct cost of the ease for Wynn Company was P30, 000. Wynn Company
was to remove the equipment and restore the site on which it is located at
the end of the lease term. The estimated cost for the removal and the end
of the lease term dismantling was P45,000. The implicit rate is not readily
determinable. The incremental borrowing rate of Wynn Company which
was the same as the prevailing interest rate at the commencement of the
lease was 8%.
a. The initial measurement of the lease liability is
b. The initial measurement of the right-of-use asset is
c. Depreciation expense for 2021
d. Carrying amount of the lease liability at December 31, 2021

4. The following facts pertain to a non-cancelable lease agreement between

Dorothy Company and Manor Company commencing on January 1, 2020
 Annual rentals due starting on January 1, 2020 P 315,000
Purchase option price at the end of lease term 15,000
Lease term 8 years
Economic life of the leased equipment 10 years
Initial direct costs 60,000
The implicit rate of the lease which was readily determinable by Dorothy
Company was 12%. Dorothy Company's management has made a
decision that it will make use of the purchase option once it becomes
exercisable.
a. The initial measurement of the light-of-use asset is
b. The initial measurement of the lease liability is
c. Depreciation expense for 2020
5. On January 1, 2020, Weary Company leased a plastic molding machine from
Lore Company. Lease term 4 years; Annual rental payment, in advance
starting January 1, 2020, P66,500; Residual value at end of the lease term
P15,000; Residual value guaranteed by Weary Company P0. Implicit rate 8%
Expected useful life of the machine is 6 vears. Weary Company intends to
return the machine to Lore Company at the end of the lease. The annual
rental payment includes P1,500 to cover the costs of maintenance and
insurance. Weary Company, likewise paid P8,000 to its broker for
securing the lease.
a. Initial measurement of the lease liability is
b. Interest expense to be reported by Weary Company in 2020
c. Carryıng value of the lease liability at December 31, 2020
d. Depreciation expense reported in 2020
e. Carrying value of the leased asset at December 31, 2021
6. Flor Company purchased a machine on December 29, 2020 for P3,
000.000.The machine's useful life was 20-vears, with a salvage value of P40,
000 and depreciated on a straight-line basis.
On January 1, 2021, Flor Company leased the machine to Nelly
Company. The non-cancelable agreement was tor 5-years. Rent paid for
the initial year was P300, 000 which will increase by P60, 000 annually.
Flor Company plans to lease it to another entity after the lease expires.
Nelly Company also paid a P60, 000 non-refundable security deposits.
 lnitial direct cost paid by Nelly Company in negotiating the lease amounted
to P35,000. Likewise, Nelly Company paid a total of 20,000 for
maintenance, and insurance on the machine for the year ended December
31, 2021
Gross rental revenue for 2021 to
7. On January 1, 2019, Door Company leased its trucks to Jelly Company for
P90, 000 per year, payable in advance, plus P5, 000 for taxes over a 5-year
period. The cost of the trucks to Door Company was P240, 000. The fair
value at the date of the lease was P362, 700. The implicit rate applied to the
agreement was 12 %. Commissions and legal fees incurred by Door
Company in connection with the negotiation for the lease amounted to
P20,000
PVF of P1 @ 12% for 5 periods 0.57
PVF of an OA @ 12% for 5 periods 3.61
PVF of an AD @ 12% for 5 periods 4.03
a. Initial measurement of the net investment in the lease
b. The net profit recognized by Door Company at commencement date is
c. Interest income for 2020
d. Net investment at December 31, 2020 is
8. On January 1, 2020, Igor Company leased a machine to Dorsey Company for
P120, 000, annually, P5, 000 of which represents reimbursements tor
maintenance and taxes, payable every December 31, for a 4-year period
starting December 31, 2020. The cost of the machine to Igor Company was
P325, 000. The fair value at the date of the lease was P388, 050. The implicit
rate of interest is 8%. The residual value of the machine vas 10,000, none of
which was guaranteed by Dorsey Company. Commissions and legal fees
incurred by lgor Company in connection with the negotiation for the lease
amounted to P12,000.
PVF of P1 @ 8 % for 4 periods 0.74
PVF of an OA @ 8% for 4 periods 3.31
PVF of an AD @ 8% for 4 periods 3.58

a. Initial measurement of the net investment in the lease is

b. The revenue (sales) recognize by the lessor at commencement date is
c. The cost of sale recognize by the Iessor at commencement date is
 d. Interest income tor 2021
e. The receivable reported im the December 31, 2021 balance sheet is
9. On December 28, 2020 Juror Company leases a machine to Petty Company
for a period of 5 years to commence on January 1, 2021. The fair value of the
machine is P545,375. The residual value at the end of the lease term is
P20,000. Juror Company intends to earn a return rate of 12% and would
require Petty Company to pay annual rentals at the beginning of each year
starting January 1, 2021 plus P7,500 for maintenance and taxes.
Juror Company incurred costs of P355,000 to construct the machine and
paid P15,000 in negotiating and closing the lease contract. The implicit
rate in the lease is 12%.
5 periods
PVF P1 @ 12% 0.57
PVF of an ordinary annuity of P1 @ 12% 3.60
PVF of an annuity in advance of P1 12% 4.03

Compute the following Residual Residual

Value Value Not
Guaranteed Guaranteed
a. Annual rentals
b. Sales
c. Cost of sales
d. Total income for 2021
e. Net investment in the balance sheet at
December 31,2021
10. Store Company leases its equipment to Free Company on December 26,
2020. The terms of the non-cancelable lease agreement are as follows:

 Non-cancellable 5-ycar lease term (equipment's estimated useful life)

  Asset cost to Store Company P2,012,800 (likewise its fair value)

 The equipment will revert back to Store Company; expected residual

value P50,000, none of which vas guaranteed by Free Company

 Initial direct cost for Store Company amounts to P90,000

 Equal annual rentals starting on January 1 2021 (commencement date)

 The implicit rate in the lease shall be 8%

5 periods
PVF P1 @ 8% 0.68
PVF of an ordinary annuity of P1 @ 8% 3.99
PVF of an annuity in advance of P1 @ 8% 4.31
a. Annual rentals
b. Profit recognized at commencement date is
c. Interest income for 2021
d. Lease receivable at December 31, 2021

11. Color Company leases equipment to Funny Company. The equipment’s

expected residual value at the end of the lease P0. Color Company intends to
earn 8% on a 5-year lease of the equipment whose carrying amount and fair
value currently is P518, 062 per unit.
Color Company completed a lease agreement with Funny Company on
December 28, 2020. The agreement will require Funny Company to pay
annual rentals at the beginning of the year starting January 1, 2021. the
commencement date of the lease plus executor costs of P9,800.
5 periods
PVF P1 @ 8% 0.68
PVF of an ordinary annuity of P1 @ 8% 3.99
PVF of an annuity in advance of P1 @ 8 4.31
a. The annual rental to be received by Color Company.
b. Total interest income arising from the lease agreement is
12. On January 1, 2021, Riley Company sells a building to Briar Company for
cash of P4, 000,000. Immediately before the transaction, the building is
carried at a cost of P3, 000,000. At the same time, Riley Company enters into
a contract Briar Company for the right to use the building for 18 years, with
annual payments of P240,000 payable staring December 31, 2021. The terms
and conditions satisfies the requirement for the transaction to be accounted
as a sale and leaseback. The fair value of the building at the date of sale was
P2,700,000
a. The initial measurement of the right-of-use asset recorded by Riley
Company is
b. The initial measurement of the lease liability recorded by Riley Company
is
c. The gain on right is transferred recognized by Riley Company.

FINANCIAL STATEMENTS
1. Faith Company provided the following balances on December 31,2020
Cash and cash equivalents 1,200,000
Inventory 650,000
Prepayments 120,000
Investment in associate 440,000
Deferred tax asset 200,000
Intangıble assets 380,000
Further analysis of Faith Company's accounts revealed the following:

 Cash account includes a sinking fund of P300,000, as well as P90,000

being held to pay VAT. The balance was net of an overdraft amounting
to P200,000 in its BPI account. Faith Company does not have any
other account in BPI.

 Prepayments included 2 P50,000 security deposit which will expire by

December 31, 2022

 The deferred tax asset was due to a future deductible amount of which
40% will reverse in 2021 and the rest evenly from 2022 to 2022
  Intangible assets includes goodwill of P70,000; P50,000 was recorded
in relation to its acquisition of Tenacity Company, while P20,000 was
recorded in relation to cost incurred in improving the initial goodwill
recognized.
a. The amount reported as current assets on December 31, 2020 is
b. The amount reported as noncurrent assets on December 31 2020

2. Persevere Company provided the following balances on December 31,

2021
Cash and cash equivalents 1, 000,000
Trade and other receivables 950,000
Inventory 500,000
Financial assets at fair value through P&L 500,000
Financial assets at fair value through OCl 800,000
Property, Plant and Equipment 1, 500,000
Further analysis of Persevere Company’s accounts revealed the following:

 Trade and other receivables included the following:

 Advances to an executive officer for P250,0009 which is due on
March 1, 2021
 Customer credit balance of P60,00 which deducted in relation to
goods returned in 2021

 Equity over the assigned accounts of P120,000; the assigned ace

amounted to P200,000 while the related note balance was P80 000
 Property, Plant and Equipment includes a plot of land in which
Persevere Company has committed to a plan to sell it and currently
active in locating a buyer to complete the plan. The carrying value of
the land included in the account was P675,000 while its fair value less
cost to sell is P600,000
a. The amount reported as current assets on December 31, 2021 is
 b. The amount reported as noncurrent assets on December 31 2021 is

3. Steadfast Company provided the following balances on December 31,

2021
Cash and cash equivalents 950,000
Inventory 800,000
Financial assets held for trading 600,000
Available-for-sale investments 2,000,000
Held-to-maturity securities 1,500,000
Cash surrender value 400,000
Further analysis of Steadfast Company's accounts revealed the following:

 Inventory included the following:

 Inventory costing P200,000 expected to be sold within Steadfast
Company’s ordinary course of operations but beyond 12 months
from December 31, 2021
 Goods costing P100,000 received from Diligent Company under
consignment

 Held-to-maturity securities represents investments in bonds of which

P600,000 is a set to mature in May 2022: and P900,000 maturing
August 2023
a. The amount reported as current assets on December 31, 2020 is
b. The amount repotted as noncurrent assets on December 31,2020 is
4. Trust Company provided the following account balances on December
31,2020
Accounts payable 450,000
Notes payable 900,000
Income tax payable 96,000
Deferred tax liability 120,000
Further analysıs of Trust Company's accounts revealed the following:

 Accounts payable included the following:

  Customer credit balance, P30,000
 Debit balances in suppliers accounts P80,000 which was
deducted
 Advances from shareholders, P200,000; call date April 1, 2021.

 Notes payable included the following:

 6%, 3-year note, face amount P400,000 from Confidence
Company, due date March 31, 2021. On December 31, 2020,
Trust Company and Confidence Company signed a refinancing
contract that will extend the due date to March 31, 2022
 8%, 3-ycar note, face amount P500,000 from Believe Company,
due date August 1, 2021. On January 1, 2021, Trust Company
completed a refinancing contract that wıll extend the due date to
August 1, 2023
a. The amount reported as current liabilities on December 31, 2020 is
b. The amount reported as noncurrent liabilities on December 31 2020
is
5. Conviction Company provided the following balances on December
31,2020
Accounts payable and accruals 700,000
Bonds payable 3,500,000
Stock dividends payable, issuance in 2021 250,000
Provisions 700,000
Further analysis of Conviction Company's accounts revealed the following:

 Accounts payable and accruals included the following:

 Bank overdraft BDO account, P40,000; Trust Company does
not have any other account in BDO.
 Accrued expenses for utilities, P90,000
 Bonds payable included the following:
 6%, Term-bonds, maturity date January 1, 2022, P500,000
 8%, serial bonds, P2,000,000 of which P250,000, matures 30
and December 31
 10%, term-bonds, maturity datea1nuary 1, 2023, recorded a
amount of P1,000,000; the bonds Were 15sued on December
31 at a discount of P120,000 giving 1t a yield rate of 12% and
recorded as expense.
  Provisions included the following:
 P500,000 representing the estimated cost to clean up. a small
lake due to contamination caused by a leak in Conviction
Company' plant. P300, 000 was expected to be incurred in 2021
and P200.000 in 2022.
 P200,000 the estimated amount provided by Conviction
Company's legal counsel in relation to a court case being faced
by the Company in which Conviction Company is reasonably
possible to lose.
a. The amount to be reported as current liabilities on December 31, 2020
is
b. The amount to be reported as noncurrent liabilities on December 31,
2020 is
6. Persist Company provided the following:
Administrative expenses 400,000
Cost of Sales 1,800,000
Distribution costs 450,000
Gain – Exchange differences on translating foreign 100,000
operations
Finance costs 300,000
Gains – Cash flow hedges 50,000
Gains on property revaluations 250,000
Loss for the year from discontinued operations 90,000
Other expenses 110,000
Other income 160,000
Loss – Remeasurements on defined benefit plan 270,000
Sales 3,200,000
Share of gain on property revaluation of associates 120,000
Share of profit of associate 80,000
Loss – Available for sale 70,000

a. The amount reported in the Profit or loss section for 2022 is

b. The amount reported in the Other Comprehensive Income section for
2022 is
7. Hope Company maintains the accounting records of Ambition Company on a cash basis.
During 2020, Ambition Company reported revenue P200,000 and P80,000 in expenses.
The following accounts were presented for the year ended December 31, 2020 and
December 31, 2021

December 31,2020 December 31,2021

Accounts receivable P 9,000 P 15,000
Unearned service revenue 3,000 4,000
Accrued expenses 4,000 2,000
Prepaid expenses 2,000 3,000
The net cash inflow (outflow) from operating activities is

8. A summary of Aspiration Company's revenues and expenses tor 2020 1s as follows:

Sales P 7,000,000
Cost of goods manufactured and sold 3,800,000
Gross profit 3,200,000
Selling, general, and administrative expenses 2,000,000
Income before income taxes 1,200,000
Income taxes 520,000
Net income P680,000

Net changes on working capital accounts for 2017 were as follows:

Debit Credit
Cash 104,000
Trade accounts receivable 400,000
Inventories 60,000
Prepaid expenses (selling and general) 10,000
Accrued expenses (75% of related to 32,000
manufacturing activities and 25% to general
operating activities)
Income taxes payable 48,000
Trade accounts payable 140,000
Deprecation on plant and equipment for the year totaled P600,000; 70%
was related to manufacturing activities and 30% to general and
administrative activities.
a. Collections from customers
b. Cash payments in relation to manufacturing activities
c. Net cash inflow (outflow) from operating activities
9. The following information was provided by Grace Company
Amortization of patent P4,000
Depreciation expense 7,000
Issuance of common stock 25,000
Issuance of new bonds payable 30,000
Net income 55,000
Decrease in accounts receivable 2,000
Increase in inventory 1,500
Payment of dividends 22,500
Purchase of equipment 33,000
Retirement of long term debt 40,000
Sale of land (includes P6,000) gain 35,000
Cash balance, January 1,2020 82,800
Increase in accounts payable 1,500

a. Net cash provided by (used for) operating activities

b. Net cash provided by (used for) investing activities
c. Net cash provided by (used for) financing activities
10. Desire Company prepared the following balance sheet data for 2021 and 2020
2021 2020
Cash and cash equivalents P518,500 P675,000
Accounts receivable 360,000 345,000
Merchandise inventory 750,000 654,000
Prepaid insurance 4,500 6,000
Buildings and equipment 5,515,500 4,350,000
Accumulated depreciation – buildings & (2,235,000) (1,995,00)
equipment
Total Assets P4,913,500 P4,035,000
Accounts payable P613,500 P945,000
Salaries payable 75,000 105,000
Notes payable – bank (current) 150,000 600,000
Notes payable – bank (long term) 1,500,00 -
Common stock 2,400,000 2,400,000
Retained earnings (deficit) 175,00 (15,000)
Total liabilities and stockholder’s equity P4,913,500 P4,035,000

Cash needed to purchase new equipment and to improve the company's

working capital position was raised by borrowing from the bank with a
long- term note. Equipment costing P75,000 with a book value of P15,000
was sold for P18,000; the gain on sale was included in net income. The
company paid cash dividends of P 90,000 and reported earnings of
P280,000 for 2019.
 There were no entries in the retained earnings account other than to
record the dividend &net income.
a. Net cash provided by operating activities
b. Net cash used for investing activities
c. Net cash provided by financing activities
11. Comparative balance sheet for Sippy & Sappy Company is presented below.
12/31/20 12/31/19
Cash P14,000 P10,500
Accounts receivable 22,000 25,500
Inventory 112,500 85,000
Prepaid expenses 3,500 4,250
Furnitures and fixtures 64,500 42,000
Accumulated depreciation (33,875) (25,425)
Total Assets P182,625 P141,825
Accrued expenses P7,000 P5,200
Salaries payable 19,425 28,875
Long-term note 17,700 -
Sippy, Capital 51,375 50,875
Sappy, Capital 87,125 56,875
Total liabilities and SHE P182,625 P141,825

Net income for the year was l43,000, which was transferred in equal
amounts o the partners accounts. Further changes in capital were from
additional investments and withdrawals by the partners. The changes in
the furniture and fixtures account arose from a purchase of additional
furniture; part of the purchase price was paid in cash and a long-term note
was issued for the balance.
a. Net cash provided br (used for) operating activities
b. Net cash provided by (used for) investing activities
c. Net cash provided by (used for) financing activities

EARNINGS PER SHARE

1. D1Company has the following shares outstanding since 2021:

 400,000, P10 par value ordınary shares

 10,000, 8%, P50 par value preference shares

D Company reported a net income of P3,250,000
Determine the amount to be reported as EPS under the following
independent assumptions:
a. preference shares are non-cumulative and no dividends were declared
since 2020
b. preference shares are non-cumulative and that dividends were
declared
c. preference shares are cumulative, no dividends were in arrears and no
dividends were declared in 2020
d. preference shares are cumulatıve, dividends afe in arrears tor 2020
and no dividends were declared in 2021
e. preference shares are cumulative, dividends are in arrears for 2020
dividends declared in 2021 amounted to P60,000 for the preferred
shares; no dividends were declared to common shareholder
2. Compute the weighted average number of shares outstanding for XIE
Company which has a simple capital structure, assuming the following
transactions in common stock occurred during the calendar year.

 January 1, Shares outstanding, 400,000;

 February 1, Issued for cash, 120,000;

 March 1, Acquired shares for cash, 84,000;

 June 30, Re-issued shares for cash, 48,000;

 September 30, Issued shares of stocks for land, 108,000;

 December 31, Issued shares for cash, 24,000

3. Compute the weighted average number of shares outstanding for EV Company which has a
simple capital structure, assuming the following transactions in common stock occurred
during the calendar year.
 Date Transactions in Ordinary Number of Shares
Shares P10 Par Value
January 1 Shares outstanding 480,000
February 1 Issued for cash 120,000
March 1 20% share dividend
May 1 Acquisition of treasury shares 100,000
October 1 Sale of treasury shares 40,000
December 31 Issued a 3-for-1 share split

4. On January 1, 2020, NE Company has 12,000 ordinary shares outstanding.

On October 1, it issued subscriptions to 4,000 shares. The subscription price
is 6.00 per share. At the date of issue each shareholder paid 3.60 and paid
an additional P1.20 on December 1, 2020. The balance of 1.20 per share will
be paid in 2021. Each part-paid share will be entitled to dividends in
proportion to the percentage price paid up on the share.
The weighted-average number of shares for basic EPS computation is
5. BAY Company operates a chain of coffee shops. It BOD has ambitious
expansion plans and decides to provide an incentive to senior management
through the issue of shares contingent on certain performance criteria being
met. The terms of the issue of shares are as follows: 500 shares will be
issued for each new coffee shop opened during the year after a minimum of
five shops have been opened The actual issue of shares will be made on
March 31, 2021.
During 2020, 18 new coffee shops were opened as follows: January
shops; March 31, 2 shops; April 30, 3 shops; July 1, 5 shops,
Septemberc3 shops; December 1, 2 shops.
BAY Company had 40,000 shares outstanding all throughout 2020 and
reported net income of P1,975,000
a. The weighted-average number of shares for basic EPS computation is
b. Basic FPS for the year
6. January 1, 2020, LV Company was incorporated and issued 25,000 of its
1,000,000, P10 par value ordinary shares for P13. At year end, LA Company
reported a net income of P1,350,000.
On July 1, 2021, LA Company 18sued an additional 50,000 shares.
Likewise, LA Company declared a 20 % stock dividend which is
distributed at December 31, 2021. 1A Company reported a net income of
P2, 100.000.
a. Basic EPS for 2020
b. Basic EPS for 2021
 c. Basic EPS tor 2020 as presented in the 2016 financial statements
7. At December 31, 2020, MI Company's issued capital consisted of
1,800,000ordinary shares of P10 each, fully paid. The profit for the year
ended December 31, 2020 was P900,000
On March 31, 2021, MI Company made a rights issue on a 1 for 4 basis at
P30. The market price of the shares immediately before the rights issue
was P60. The net income for 2021 was P1, 200,000
a. The basic EPS for 2021
b. The basic EPS for 2020 as presented in the 2021 comparative
financial statements is
8. CH Company has basic earnings per common share of P2.30 for the year
ended December 31, 2020. For each of the following examples, decide
whether the convertıble security would be dilutive or anti-dilutive in
computing diluted EPS. Consider each item individually.
Assume a tax rate of 35%.
a. 9% debentures, P1, 000,000 face value convertible bonds. The
conversion rate is 25 common shares for each P1,000 face value bond. of
common stock for each P1,000 face value bond.
b. P800,000 of 7%o debenture bonds are convertible at the rate of 20 shares
of common stock for each P1000 face value bond.
c. 6.5%, P100 par value cumulative preferred stock. Each of these 5,000
preferred shares outstanding is convertible into 2 shares of common stock
d. 8% P60 par value cumulative preferred stock. Each of these 3,000
preferred shares outstanding is convertible into 2 shares of common stock
e. Options to purchase 200,000 shares of common stock are outstanding
price is P25 per share. Average market price is P30 per share
f. Options to purchase 150,000 shares of common stock are outstanding.
The exercise price is P25 per share. Average market price is P20 per
share.

9. At December 31, 2020, AEL Company had 2,000,0O0 shares of common

stock outstanding. On January 1, 2021, AEL Company issued 500,000
shares of preferred stock which were convertible into 1,000,000 shares of
common stock.
 During 2021, AEL Company declared and paid P900,000 cash dividends
on the common stock and P300,000 cash dividends on the preferred stock
Net income for the year ended December 31, 2021 was P3,000,000
Tax rate was 30%.
a. Basic EPS b. Diluted EPS

10. On January 2, 2021, Kred Company 1ssued P3,000,000 of its 10% bonds
convertible in total into 200,000 shares of Kred Company's common stock.
The bonds were issued in a way the selling price was equal to the debt
instrument's par value and fair value ot the equity component. No bonds
were converted during 2021. in addition, Kred Company had 500,000 shares
of common stock outstanding.
Kred Company's 2021 net income was P5,500,000.
The enacted tax rate during 2021 was 30%.
a. Basic eatnings per share b. Diluted earnings per share
11. In 2021, Dev Company issue, at par, 60, P1,000 par value, 8% bonds, each
convertible into 50 shares of common stock.
Dev Company had revenues of P17,500 and expenses other than interest
and taxes of P8,400 for 2017 (tax rate 30%).
Throughout 2021, 2,000 shares of common stock were outstanding, none
of the bonds was converted.
a. Compute the basic and diluted earnings per share in 2021.
b. Assuming the bonds were issued on September 1, 2021 and none
have been converted; compute the basic and diluted earnings per
share in 2021
12. On January 1, 2020, 1DJB Company had 400,000 shares of common
outstanding. On October 1, 202I DJB Company sold 100,000.
In addition DJB Company had the following debt and equity securities
outstanding at year end.

 20,000 shares of P100, 10% cumulative preferred stock.

 30,000 shares of 8% convertible cumulative preferred stock, par P100,

sold at P110. Each share of preferred stock is convertible into 2 shares of
common stock

 P2,000,000 face value 8% bonds sold at par

  P3,000,0O00 face value of 6% convertible bonds sold to yield 8%.
Unamortized bond discount is P200,000 at December 31, 2019. Each
P1,000 bond is convertible into 14 shares of common stock.

 DJB Company issued to its shareholders options to purchase 80,000

shares on April 1, 202U. The exercise price is P30 per share, market
value at date of option was P29; average market from May 1 to December
31, 2020, P36.
DJB Company reported a net income of P2,140,000. The income tax rate was
30%.
For the year ended December 31, 2020, compute basic and diluted EPS.
13. MFT Company reported net income of P975,009 in 2020 and had 500,000
ordinary shares outstanding. MFT likewise has the following potentially
dilutive securities outstanding all throughout 2020:

 8%, P1,000,000 face value convertible bonds, equivalent common

shares, 34,750

 10%, 20,000, P100 par value cumulative convertible preferred shares,

equivalent common shares, 130,500

 75,000 share options; exercise price P25, average market value P40

 Tax rate for 2020 and future years 30%

Compute the basic and diluted EPS for 2020.