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ACCA December 2023 Section C question

This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.

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February 19, 2024 at 8:51 pm #700693
tamerhammoudeh
Participant
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Question: The share capital at 1 November 20X2 comprised 1,800,000 ordinary shares of $0.50 each. On 1 February 20X3, Gibraltar Co made a 1 for 5 rights issue for $1 per share. The market price of existing shares prior to the rights issue was $1.60. No adjustment has been made for the rights issue.
EPS of 20X2: 0.20
Requirement: restate 20X2 EPS
My answer: Profit of 20X2 = 0.20 * 1.800.000 = 360.000
WA #Shares = 2.100.000
360.000/2.100.000 = 0.17
ACCA answer: Theoretical ex-rights value per share = $9/6 shares = $1·50
Restated 20X2 EPS of 20c x $1·50/$1·60 = 18·75c rounded to 19c
What am I missing here?
February 26, 2024 at 9:17 pm #701225
P2-D2
Keymaster
- Topics: 4
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You are approaching the question in correctly. To restate the prior year EPS then you need to use the TERP and apply it to the prior year figure. I’m not quite sure what you’re actually doing in your calculation.
Thanks
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