Home › CA Final › financialreporting › Ind AS 33 — Diluted EPS: If-Converted Method, Treasury Stock Method, Options/Warrants, Convertibles, Contingently Issuable Shares › Entity A has 25,000 4% debentures at ₹1 nominal …
Entity A has 25,000 4% debentures at ₹1 nominal convertible 1:1. Profit before tax ₹80,000; after tax ₹64,000 (20% tax). Mgmt bonus = 1% of PBT. Diluted EPS earnings (numerator adjustment):
A₹65,000
B₹64,800
C₹64,000 (no adjustment)
D₹64,792 = 64,000 + 1,000 interest saved − 200 tax + tax benefit on bonus − bonus increase
Answer & Solution
Correct answer: D. ₹64,792 = 64,000 + 1,000 interest saved − 200 tax + tax benefit on bonus − bonus increase
If converted: save interest ₹25,000×4% = ₹1,000; tax effect 20% = (₹200); higher PBT raises bonus by ₹1,000×1% = (₹10); tax benefit on bonus = ₹2. Adjusted earnings = 64,000 + 1,000 − 200 − 10 + 2 = ₹64,792.
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