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It is stated that the Bonus issue had been in existence from the beginning of the year, Why the period adjustment is required as mentioned in Example 2 of OT text:-
Larissa had earnings of $600,000 for the year ended 28 February, 2009 and 2,000,000 $1 equity share capital at 1 March, 2008. On 31 August, Larissa issued 3,000,000 new shares at full market price, and on 1 November 2008, Larissa made a bonus issue of 2 new shares for every 7 already held. Last year’s EPS was disclosed as 16c.
relevant portion of answer:-
1.11.08 6,428,571 4/12 2,142,857
Because there were 6,428,571 shares in issue for only 4 months until the end of February
This exercise of calculating WANES can be tackled a different way
It’s just that I ALWAYS do it this way
If you’re still not happy with it, let me know and I’ll possibly show you the other way. The problem there is that there is a greater chance that you will confuse the two separate ways and that would be a most unfortunate error to make
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