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Good day,
I have a problem in applying the following:
as from KAPLAN PAGE 338 SAYS
Note: If you have an issue of shares at full market price and a bonus
issue, you apply a bonus fraction from the start of the year up to the
date of the bonus issue. For example, if the bonus issue was 1 share
for every 5 owned, the bonus fraction would be 6/5 (as everyone who
had 5 shares now has 6).However I am failing to apply the above to a certain question in BPP Revision Kit.
As from BPP:
QN.248;
Waffle had share capital of $7.5 million in 50c equity shares at 1 October 20X6. On 1 January 20X7 it made an
issue of 4 million shares at full market price immediately followed by a 1 for 3 bonus issue.
The financial statements at 30 September 20X7 showed profit for the year of $12 million.
What was EPS for the year?
$ (2 marks)ANS;
248 $0.50 Shares
‘000
B/f (7,500 / 0.5) 15,000
Full market price issue (4,000 × 9/12) 3,000
Bonus issue (18,000 / 3) 6,000
Total 24,000May you help because I am failing to apply.
We had 15 million shares in issue for the full year
And a further 4 million shares in issue for 9 months … therefore the equivalent of 3 million in issue for the full year
So we had the equivalent of 18 million in issue for the full year
And a further 1 for 3 bonus issue gives us an additional 6 million
Thus we have effectively 24 million shares in issue for the full year
And with £12 million earnings, that gives us 50 cents earnings per share
Better?
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