Hi… please explain why the number of shares for 1 April is 3,600,000 and not 1,200,000. Thank you so much.
The Garfish Company had profits after tax of £3.0 million in the year ended 31 December 20X7. On 1 January 20X7, Garfish had 2.4 million ordinary shares in issue. On 1 April 20X7 Garfish made a one for two rights issue at a price of £1.40 when the market price of Garfish’s shares was £2.00. Required: What is Garfish’s basic earnings per share figure for the year ended 31 December 20X7, according to IAS 33 Earnings per Share?
We will have issued 1,200,000 shares at 1 April and so there will now be a total of 3,600,000 in issue as there were already 2,400,000 in issue prior to the rights issue of shares.