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EPS problem: Please, can someone help? Thanks

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › EPS problem: Please, can someone help? Thanks

  • This topic has 0 replies, 1 voice, and was last updated 11 years ago by alua.
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  • Author
    Posts
  • April 19, 2014 at 5:27 pm #165650
    alua
    Participant
    • Topics: 28
    • Replies: 37
    • ☆☆

    Hi,
    I cannot understand the workings for arriving at the weighted average number of shares (particularly the bonus fraction column) in this exercise:

    FENTON (Exercise 70 in BPP revision kit)
    “Fenton had 5,000,000 ordinary shares in issue on 1 January 20X1.
    On 31 January 20X1, the company made a rights issue of 1 for 4 at $1.75. The cum rights price was $2 per share.
    On 30 June 20X1, the company made an issue at full market price of 125,000 shares.
    Finally, on 30 November 20X1, the company made a 1 for 10 bonus issue.
    Profit for the year was $2,900,000.
    The reported EPS for year ended 31 December 20X0 was 46.4c.

    Required= EPS figure for year ended 31 Dec 20X1 and the restated EPS for year 20X0.

    ANSWER (per text):

    1.1.X1 b/d 5,000,000 x1/2 x2.00/1.95×11/10 470,085
    31.1.X1 Rights issue 1,250,000
    6,250,000 x5/12 x11/10 2,864,583
    30.6.X1 FMP 125,000
    6,375,000 x5/12 x11/10 2,921,875
    30.11.X1 Bonus issue 637,500
    7,012,500 x1/12 584,375
    6,840,918

    TERP 4 @ 2 = 8.00
    1 @ 1.75 = 1.75
    5 9.75

    Therefore TERP = 1.95

    EPS for y/e 31.12.X1 = $2,900,000/6,840,918 = 42.4c
    Restated EPS for y/e 31.12.X0 = 46.4c x 1.95/2.00 x 10/11 = 41.1c

    ——————————————————————————————————
    I cannot see where the fraction 11/10 comes from at the WANS calculation but also fraction 10/11 (for sure they are related) when restating the EPS for previous year.

    Many Thanks,
    Alua

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