EPS bonus issue - confused over example

By following rule 1 in the course notes, you will find that, by multiplying all prior periods this year by the bonus fraction, the application of the fraction will have the same effect as ensuring the position that the bonus shares existed throughout the year. The multiplication by that bonus fraction does it automatically whereas trying it your way is going to get you in all sorts of trouble Reread the notes and then try the example doing it my way. But reread, and reread again, those rules VERY carefully. Multiply ALL PRIOR PERIODS THIS YEAR by the bonus fraction Understand? No confusion? Well, about 75% of the students that I teach still get that step wrong even though I emphasise it over and over again See how you get on! And come back to me if you're still struggling

Thank you for that. Yes, I get that now. Using the Bonus fraction has the effect of the bonus issue existing all year. I have also been using Kaplan text and it makes no mention of this at all. Thanks. Sarah

Well, that's ok then But the offer still stands - come back to me if you need to

I attempted this question, however, I used different workings to arrive at the answer. Is it correct to do the following: To find current EPS: 2,000,000 * 6/12 = 1,000,000 5,000,000 * 6/12 = 2,500,000 Bonus issue 2:7 = 3,500,000*2/7= 1,000,000 # of shares = 1,000,000+2,500,000+1,000,000= 4,500,000 EPS = 600,000/4,500,000 = 13.3c To find comparative EPS: Bonus issue based on the number of shares held in prior year = 2,000,000*2/7 = 571,429 # of shares = 2,000,000 + 571,429= 2,571,429 EPS = 0.16 * 2,000,000/2,571,429 = 12.4c

Yes, that's ok. I much prefer my layout but, so long as you keep arriving at the same answer as I and the approved publishers, then that's fine

Okay thanks.

You're welcome