The tax rate is 40%. Ashante Sports Collections Limited (ASCL) ended 20X5 with700,000 common shares outstanding, after issuing 200,000 common shares forcash on 31 December. There were no other common

The tax rate is 40%. Ashante Sports Collections Limited (ASCL) ended 20X5 with

700,000 common shares outstanding, after issuing 200,000 common shares for

cash on 31 December.

There were no other common share transactions during the period.

Net earnings were $1,300,000.

The following are elements of ASCL's capital structure:

a) ASCL had $5,000,000 (par value) of 8% bonds payable outstanding during

the year. The bonds are convertible into 80 common shares for each $1,000

bond. Bond interest expense was $403,000 for the year.

b) ASCL had 40,000 options outstanding throughout 20X5 to purchase 120,000

common shares for $3 per share. The average share price during the year

was $15. The options were not exercisable until 20X10.

c) ASCL had 70,000, $1.25 preferred shares outstanding. The shares were

cumulative. No dividends were declared in 20X6. The shares were convertible

into 50,000 common shares.

d) ASCL had a contingent share agreement outstanding to issue 50,000

common shares to the prior shareholders of a company that ASCL had

acquired in 20X2. The shares become issuable if the acquired company's

operations accumulate $5,000,000 of post-acquisition earnings before the

end of 20X8. Earnings have been $3,500,000, to date, and the target is

expected to be met in 20X7.

e) ASCL had $8,000,000 (par value) of 6% bonds payable, issued on 31 March

20X5. The bonds are convertible into 40 common shares for each $1,000

bond. Bond interest expense was $285,750 for the nine months of the year

that the bond was outstanding.

Required:

Compute ASCL’s basic and diluted EPS for 20X5.