Hello, I'm not getting the answer for the following question:
The financial statements of Franco group showed that retained earnings had increased in the year by $689,424. The following items were presented by Franco in either the statement of profit or loss for the year or in the statement of changes in equity:
Interest - 84,441
Taxation - 227,553
Non-controlling interest - 47,338
Ordinary dividend (10 cents per share) - 65,000
What figure should be reported in the financial statements for basic earnings per share, to the nearest cent?
The answer says its 116 cents but I'm getting 50.78 cents
My workings:
PBT 689424 Ordinary shares 65000
Less: Interest 84441 Rate 0.1
Less: Taxation 227553 No. of shares (65000/0.10) 650000
Less: NCI 47338
Profit 330092
EPS (330092/650000)*100 = 50.78
Where did I go wrong?
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EPS - Franco
Sorry, the workings seem to have been jumbled up!
PBT 689424
Less: Interest 84441
Less: Taxation 227553
Less: NCI 47338
Profit 330092
Ordinary shares 65000
Rate 0.1
No. of shares (65000/0.10) 650000
EPS (330092/650000)*100 = 50.78
Hi,
The figure of 689,424 is not the PBT figure as you state but is the increase in retained earnings for the year. You need to work back from this to get the profit for the year. Give it a go and see how you get on.
Thanks
Sorry sir, I don’t understand. How do I work back from it?
Hi,
The movement in retained earning is made up of the profit for the year less any dividends declared. So you need to adjust the movement for the dividends figure given in the question and that will give you the profit for the year figure that is then used to calculate the EPS.
The interest, tax and NCI figures are all irrelevant and have been shown to try to confuse you.
Give it a go and see how you get on.
Thanks
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