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Hi Teacher,
There is question which i read answer but still dont understand :
A co had 400,000 shares in issue in 2011 and it made bonus issue of 100,000 shares in 2012 . Total earning for 2012 is 80,000, EPS for 2011 is 18.75c. Calculation results that EPS for 2012 is 16c. And EPS for 2011 is restated as 18.75× 400/500= 16. But I think it should be 18.75× 500/400. So What is right?
Thank you for reading my questionThe restated eps from the previous year is calculated by multiplying last year’s declared eps (18.75) by the RECIPROCAL of this year’s bonus fraction
This year’s bonus fraction is 5/4 (or 500,000/400,000) and the reciprocal is therefore 4/5
Therefore the restatement calculation is 18.75 x 4/5 = 15 (NOT 16 as you have written)
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