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MOcha 313 DEC11- EPS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › MOcha 313 DEC11- EPS

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • March 8, 2022 at 6:08 pm #650285
    alawi sayed
    Participant
    • Topics: 301
    • Replies: 352
    • ☆☆☆☆

    Hello Sir,

    for this question how is the correctness of the EPS

    313 Mocha Co (Dec 11 amended) 36 mins
    The following information relates to the draft financial statements of Mocha Co:
    SUMMARISED STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER
    20X1 20X0
    $’000 $’000
    ASSETS
    Non-current assets
    Property, plant and equipment (note (i)) 32,600 24,100
    Financial asset: equity investments (note (ii)) 4,500 7,000
    37,100 31,100
    Current assets
    Inventories 10,200 7,200
    Trade receivables 3,500 3,700
    Cash and cash equivalents nil 1,400
    13,700 12,300
    Total assets 50,800 43,400
    EQUITY AND LIABILITIES
    Equity
    Equity shares of $1 each (note (iii)) 14,000 8,000
    Share premium (note (iii)) nil 2,000
    Revaluation reserve (note (iii)) 2,000 3,600
    Retained earnings 13,000 10,100
    29,000 23,700
    Non-current liabilities
    Lease liability 7,000 6,900
    Deferred tax 1,300 900
    8,300 7,800
    Current liabilities
    Tax 1,000 1,200
    Bank overdraft 2,900 nil
    Provision for product warranties (note (iv)) 1,600 4,000
    Lease liability 4,800 2,100
    Trade payables 3,200 4,600
    13,500 11,900
    Total equity and liabilities 50,800 43,400
    SUMMARISED STATEMENTS OF PROFIT OR LOSS FOR THE YEARS ENDED 30 SEPTEMBER:
    20X1 20X0
    $’000 $’000
    Revenue 58,500 41,000
    Cost of sales (46,500) (30,000)
    Gross profit 12,000 11,000
    Operating expenses (8,700) (4,500)
    Investment income (note (ii)) 1,100 700
    Finance costs (500) (400)
    Profit before tax 3,900 6,800
    Income tax expense (1,000) (1,800)
    Profit for the year 2,900 5,000

    (iii) On 1 April 20X1 there was a bonus issue of shares that was funded first from the share premium account
    and then from the revaluation surplus account. This was followed immediately on the same day in April by
    an issue of shares for cash at par.
    (iv) The movement in the product warranty provision has been included in cost of sales.
    the Answer is

    (b) Earnings per share 30 September 20X0
    5,000,000/8,000,000 = $0.63 per share
    Earnings per share 30 September 20X1
    2,900,000/(8,000,000 u 6/12) + (14,000,000 u 6/12) = $0.26 per share

    for 20×1

    The total share including bonus shares should be 8000+3600=11600k into 6/12
    then 14000k into 6/12

    please clarify this matter Sir,

    Thanks,

    March 12, 2022 at 8:34 am #651125
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Hi,

    You are correct within your understanding of adding the 3,600 bonus shares to the figures but you then need to apply the bonus fraction to the now 11,600 shares in issue (8,000 + 3,600).

    The bonus fraction is the number before divided by the number after, which is 8,000 / 11,600. If you multiply this by the 11,600 and the 6/12 then you still get to the same answer. The answer shown takes a short cut that I doubt many would even try to do in the exam.

    Thanks

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