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Hello Sir,
In the following question I want to know about restating the 20×7 EPS how we are going to do it,
if it comes in the exam and we are told to restate the comparative then what we will have to do
what is the logic behand it ,
Thanks,
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Q
190 Plumstead Co had 4 million equity shares in issue throughout the year ended 31 March 20X7. On
30 September 20X7 it made a 1 for 4 bonus issue. Profit for the year ended 31 March 20X8 was
$3.6 million, out of which an equity dividend of 20c per share was paid. The financial statements for the year
ended 31 March 20X7 showed earnings per share (EPS) of $0.70.
What is the EPS for the year ended 31 March 20X8 and the restated EPS for the year ended 31 March 20X7?
20X8 $
20X7 $ (2 marks)
Section
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Answer
190
Number of shares
Time
apportioned
Bonus
fraction
Weighted
average
1/4/X7 4,000,000 6/12 5/4 2,500,000
30/09/X7 Bonus issue (1 for 4) 1,000,000
5,000,000 2,500,000
5,000,00$0.72 / $0.56 Shares
‘000
B/f 4,000
Bonus issue 1,000
5,000
EPS 20X8 = 3.6 / 5 = $0.72
EPS 20X7 = $0.70 × 4,000 / 5,000 = $0.56Hi,
As there was a bonus issue during the year then we need to update the prior year figure as if the bonus issue was in place. To do this we apply the bonus fraction of 5/4, i.e. there were four in issue before and now there are five in issue afterwards (4 plus 1), to the prior year EPS figure.
In doing this we are applying the fraction to the number of shares that were in issue (the denominator in the calculation), hence would be dividing the $0.70 by the 5/4.
Thanks
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