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Need help on online practice question number 3 on eps

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Need help on online practice question number 3 on eps

  • This topic has 2 replies, 3 voices, and was last updated 5 years ago by P2-D2.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • June 2, 2020 at 8:20 pm #572614
    farhaanm
    Participant
    • Topics: 165
    • Replies: 73
    • ☆☆☆

    this is the question:

    Eyot plc had an issued share capital at 31
    December, 2015 of $52 million equity
    shares of $1 each. On 1 March, 2015
    Eyot plc had made a 2 for 5 bonus issue
    followed on 31 July by an issue at full
    market price of 10 million shares at $1.75
    each
    What is the weighted average number of
    equity shares in issue for Eyot plc in the
    year to 31 December, 2015?
    77,800,000
    42,738,095
    76,966,667
    46,166,667

    this is the answer:

    Incorrect
    If there are 52 million shares at the end of
    the year after an issue of 10 million
    shares at full price on 31 July, then on 30
    July there must have been only 42 million
    shares in issue
    If there are 42 million shares in issue
    after a 2 for 5 bonus issue on 1 March,
    then on 28 February there must have
    been only 30 million shares in issue
    1 January-1 March = 2/12, 1 March -31
    July = 5/12, 1 August-31 December =
    5/12
    30,000,000 x 2/12 x 7/5 = 7,000,000
    42,000,000 x 5/12 17,500,000
    52,000,000 x 5/12 = 21,666,667
    wanes = 46,166,667

    I think i have a problem with this:

    30,000,000 x 2/12 x 7/5 = 7,000,000

    why is it multiplied by 7/5?

    June 3, 2020 at 2:08 pm #572670
    anniebabe
    Participant
    • Topics: 33
    • Replies: 102
    • ☆☆

    Its about the bonus issue – you did have 5 shares and now you have 7
    look at bonus fractions and terp in your text book

    June 4, 2020 at 10:52 am #572847
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    Correct, the 7/5 is the bonus fraction, which is the number of shares after the issue divided by the number of shares before the issue.

    Thanks

  • Author
    Posts
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