Hi Teacher, I have question that confuses me as follow:
Waffle had share capital of 7.5 mil in 50c equity shares at 1 Oct 20x6. On 1 Jan 20x7 it made an issue of 4 mil shares at full market price immediately followed by a 1 for 3 bonus issue. Profit at 3 Sep 20x7 was $12 mil. Calculate EPS.
Answer is:
B/f : 7500/0.5 = 15000 shares
full market price issue: 4000× 9/12= 3000 shares
bonus issue : 18000/3= 6000shares
EPS: 12/24= $0.5
I wonder why they dont include months calculation as
total shares=15000×3/12 +4000×9/12 +6000×9/12?
Thank you for reading and look forward to your help.
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EPS calculation
Because the bonus shares were issued subsequent to the issue at full value, just 3 months into the year, we can only treat those bonus shares as being attributable to 9 months' worth of new shares
Your answer is clearly wrong because the 15,000,000 were in issue for the full year, not just for 3 months
So ....
After issuing the 4,000,000 at full market price and then immediately giving a one for three bonus issue, my figures for the year are as follows:
1.10.06 15,000,000 12/12 15,000,000
1. 1.07 4,000,000 9/12 3,000,000
1. 1.07 5,000,000 12/12 5,000,000
1. 1.07 1,333,333 9/12 1,000,000
Wanes 24,000,000
EPS $12,000,000 / 24,000,000 = $0.50
That bonus issue of 1 for 3 has to be applied separately to the 15,000,000 original shares and then to the 4 million shares that were in issue for just 9 months
Where's the question from?
It's a poser!
Thank you.
I got it from practice book from 2015 to August 2016.
Thanks for that information
It's a tricky question - rather more of a P2 type EPS problem than one from F7
hhmm sir..
I am not sure I follow your calculation..
1.10.06 15,000,000 12/12 15,000,000
yes I get this calculation... the 15M shares in October.
1. 1.07 4,000,000 9/12 3,000,000
ok yes I get this calculation.. there is 9 months from 1st of jan to 31st sep.. so you have 9/12 * 4m shares = 3m shares
1. 1.07 5,000,000 12/12 5,000,000
ok yes, this is the bonus issue 1/3*15million= 5m
1. 1.07 1,333,333 9/12 1,000,000
what in the question tells us/hints to take 9/12th of 1M shares? where did you get the 1M shares from?
It's
"1. 1.07 1,333,333 9/12 1,000,000" - 9 months of 1,333,333
sorry. not sure I follow sir. where did the 1,333,333 come from? where did the 1,000,000 come from. thanks where in the question can I see information that will give me those figures?
It's from here:
'an issue of 4 mil shares at full market price immediately followed by a 1 for 3 bonus issue'
A 1 for 3 on 4 million is 1,333,333 and there are 9 months' worth of this bonus
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