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Need help with question 2 from the online practice test earning per share

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Need help with question 2 from the online practice test earning per share

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 29, 2020 at 7:01 pm #572237
    farhaanm
    Participant
    • Topics: 165
    • Replies: 73
    • ☆☆☆

    This is the question:

    Eight plc had an issued share capital at 1 April, 2014 of $ 42 million 50 cent equity shares.
    On 15 August, 2014 Eight plc made a 2 for 5 bonus issue followed on 1 November by an
    issue at full market price of 20 million shares at 75 cents each.

    This was followed on 1 January, 2015 by a 1 for 4 rights issue at 60 cents per share exercise
    price. Mid-market price at the start of 2015 was 80 cents.
    What is the weighted average number of shares in issue for Eight plc in the year to 31
    March, 2015?

    This is the answer:

    Incorrect
    rights fraction is:
    4@ 80 3.20
    1@ 60 = 0.60
    3.80/5 76 (ok)
    rights fraction is 80/76(ok), bonus fraction is 7/5 (not ok)
    84 x 7/5 = 117.6
    1 April -1 November 7/12,1 November 1 January 2/12, 1 January-31 March = 3/12
    117,600,000 x 7/12x 80/76 =72,210,526
    137,600,000 x 2/12 x 80/76= 24,140,351
    172,000,000 x 3/12 = 43,000,000
    wanes 139,350,877

    I seems to have the exercise till there:
    rights fraction is:
    4@ 80 3.20
    1@ 60 = 0.60
    3.80/5 76 (ok)
    rights fraction is 80/76(ok), bonus fraction is 7/5 (not ok)
    84 x 7/5 = 117.6
    1 April -1 November 7/12,1 November 1 January 2/12, 1 January-31 March = 3/12
    117,600,000 x 7/12x 80/76 =72,210,526

    I calculated the shares for each date range and then arriving at the rights issue i did what you did in the lecture.

    please explain to me this part:

    137,600,000 x 2/12 x 80/76= 24,140,351
    172,000,000 x 3/12 = 43,000,000
    wanes 139,350,877

    especially what is the bonus fraction.

    May 29, 2020 at 8:54 pm #572248
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    If there was a bonus issue of 2-for-5 then the onus fraction is 7/5 as there were 5 shares in issue before and 7 after (5+2) after the issue.

    The rest of the solution is looking at the number of shares in issue, the number of months that they were in issue for and the rights issue fraction.

    Thanks

  • Author
    Posts
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