Question
The following balances were taken from the records of Silverpine Group for the year ended December 31, 2025.
| Account | Amount |
|---|
| Sales Revenue | $1,872,000 |
| Sales Returns and Allowances | 22,000 |
| Cost of Goods Sold | 1,020,000 |
| Selling Expenses | 285,000 |
| Administrative Expenses | 173,000 |
| Interest Expense | 32,000 |
Additional information:
- The income tax rate is 25%.
- The weighted-average number of ordinary shares outstanding during 2025 was 125,000.
- Silverpine has convertible preference shares on which dividends of $30,000 were declared during the year. The preference shares are convertible into 25,000 ordinary shares and the conversion is dilutive.
- IAS 33 requires presentation of both basic and diluted earnings per share on the face of the income statement.
Instructions:
Prepare a multi-step income statement for the year ended December 31, 2025, including basic and diluted earnings per share (rounded to two decimal places).
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 33 — diluted earnings per share
Diluted EPS asks what basic EPS would have been had all dilutive potential ordinary shares converted. Adjust the numerator for anything that would no longer be charged after conversion, adjust the denominator for the extra shares, and include an instrument only if it actually reduces EPS.
Common mistakes
- Including an antidilutive instrument — one that would raise EPS must be excluded.
- Adding the shares from convertible debt without adding back the after-tax interest saved.
- Applying the full share count for instruments issued part-way through the period instead of time-weighting them.
Further readingIAS 33: basic and diluted EPS