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Hello Sir,
I have a small doubt in the calculation of shares in the question of rights issue with bonus issue given in the mock exam.
question:
During the year completed Flyscreen had two share issues
the first, a bonus issue was made on the basis of 1 for 5 on 1 december 2015.
the second a rights issue was made on the basis of 2 for 3 on 31 march 2015 at an exercise price of $1.50.
mid market price immediately before the bonus issue was $1.80 and immediately before the rights issue was $1.90
share capital as at 30 june 2016 was $500,000,000 equity shares of 50 cents each and earning for the year ended 30 june 2016 were $200,000.
the earnings per share is to be calculated for the year ended 30 june 2016.Solution:
1.07-30.11 5/12* 500,000*6/5*190/174 = 272988
1.12-31.3 4/12*600,000*190/174 =218390
1.04-30.6 3/12* 1000,000=250,000sir im extremely confused how the shares 500000, 600000 and 1000000 are calculated please help sir.
thank you!!!Hi,
It is tricky because the share issues have already been accounted for and we need to work backwards from the figure in the TB to get the number of shares in issue.
If there are $500,000 of 50c shares in issue then we have 1,000,000 shares in issue at the end of the year (500,000 / 0.5).
If before this there was a 2-for-3 rights issue then there would have been 3 shares in issue before and 5 in issue after the rights issue. So to get the number in issue before we have to take 3/5 x 1,000,000 to give 600,000.
Similarly, given there was a 1-for-5 issue prior to this then there would have been 5 shares in issue before and 6 in issue after the bonus issue. So to get the number of shares in issue before we have to take 5/6 x 600,000 to give 500,000.
Thanks
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