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ACCA FR · Guided practice (Show me how)

Chapter 19: Earnings per share (IAS 33)

Basic EPS - full-price, bonus and rights issues

Consider the following share issues. EPS is in cents.

Ruth makes up its accounts to 30 June each year. On 1 July 20X5 Ruth had 500 million ordinary shares in issue. Profits for the year to 30 June 20X6 were $250m; there were no preference shares. Calculate the basic EPS assuming, in turn, each of the following (each is a separate case):

  1. an issue of 50 million new shares at full market price on 1 August 20X5;
  2. a 1 for 4 bonus issue on 1 November 20X5;
  3. a 1 for 5 rights issue on 1 February 20X6 at $1.25. The price of a share immediately before the rights issue was $1.40.

Ernie had earnings of $750,000 for the year ended 31 March 2019. There were 2,000,000 $1 equity shares in issue on 1 April 2018; a new issue of 3,000,000 shares at full market price was made on 30 September 2018, and a bonus issue of one new share for every two held on 1 December 2018. The EPS reported for the year ended 31 March 2018 was 15.5c.

  1. Ruth: a full-price issue and a bonus issue

    Calculate Ruth's weighted average number of shares and basic earnings per share for the year ended 30 June 20X6 for the full-price issue case, and its basic earnings per share for the bonus issue case.

  2. Ruth: a rights issue

    Calculate Ruth's theoretical ex-rights price, weighted average number of shares and basic earnings per share for the year ended 30 June 20X6 for the rights issue case.

  3. Ernie: several issues and the comparative

    Calculate Ernie's weighted average number of shares and basic earnings per share for the year ended 31 March 2019, and its restated comparative earnings per share for 2018.

Opening this exercise…