FR - EPS (2022 - 23)

On 1 October 20X4, Hoy Co had $2·5 million of equity share capital (shares of 50 cents each) in issue.

No new shares were issued during the year ended 30 September 20X5, but on that date there were outstanding share options which had a dilutive effect equivalent to issuing 1·2 million shares for no consideration.

Hoy’s profit after tax for the year ended 30 September 20X5 was $1,550,000.

In accordance with IAS 33 Earnings Per Share, what is Hoy’s diluted earnings per share for the year ended 30 September 20X5?

• $0·25

• $0·41

• $0·31

• $0·42

Aqua has correctly calculated its basic earnings per share (EPS) for the current year.

Which of the following items need to be additionally considered when calculating Aqua’s diluted EPS for the year?

(i) A 1 for 5 rights issue of equity shares during the year at $1·20 when the market price of the equity shares was $2·00

(ii) The issue during the year of a convertible (to equity shares) loan note

(iii) The granting during the year of directors’ share options exercisable in three years’ time

(iv) Equity shares issued during the year as the purchase consideration for the acquisition of a new subsidiary company

• All four

• (i) and (ii) only

• (ii) and (iii) only

• (iii) and (iv) only

Barwell Co had 10 million ordinary shares in issue throughout the year ended 30 June 20X3. On 1 July 20X2 it had issued $2 million of 6% convertible loan stock, each $5 of loan stock convertible into 4 ordinary shares on 1 July 20X6 at the option of the holder.

Barwell Co had profit for the year ended 30 June 20X3 of $1,850,000. It pays tax on profits at 30%.

What was diluted earnings per share for the year?

• $0.167

• $0.185

• $0.161

• $0.17

At 30 September 20X2 the trial balance of Cavern Co includes the following balances:

$'000

Equity shares of 20c each 50,000

Share premium 15,000

Cavern Co has accounted for a fully subscribed rights issue of equity shares made on 1 April 20X2 of one new share for every four in issue at 42 cents each. This was the only share issue made during the year.

Using the drag and drop options below, show the balances on the share capital and share premium accounts at 30 September 20X1?

Share capital .......................... $'000

Share premium ................................. $'000

• Share capital - $50,000

  Share premium - $11,250

• Share capital - $37,500

  Share premium - $2,500

• Share capital - $4,000

  Share premium - $40,000

• Share capital - $40,000

  Share premium - $4,000

Aqua Co has correctly calculated its basic earnings per share (EPS) for the current year.

Which of the following items need to be additionally considered when calculating the diluted EPS of Aqua Co for the year?

(i) A 1 for 5 rights issue of equity shares during the year at $1.20 when the market price of the equity shares was $2.00

(ii) The issue during the year of a convertible (to equity shares) loan note

(iii) The granting during the year of directors' share options exercisable in three years' time

(iv) Equity shares issued during the year as the purchase consideration for the acquisition of a new subsidiary company

• All four

• (i) and (ii) only

• (ii) and (iii) only

• (iii) and (iv) only

Many commentators believe that the trend of earnings per share (EPS) is a more reliable indicator of underlying performance than the trend of net profit for the year.

Which of the following statements supports this view?

• Net profit can be manipulated by the choice of accounting policies but EPS cannot be manipulated in this way

• EPS takes into account the additional resources made available to earn profit when new shares are issued for cash, whereas net profit does not

• The disclosure of a diluted EPS figure is a forecast of the future trend of profit

• The comparative EPS is restated where a change of accounting policy affects the previous year's profits

At 1 January 20X8 Artichoke Co had 5 million $1 equity shares in issue. On 1 June 20X8 it made a 1 for 5 rights issue at a price of $1.50.

The market price of the shares on the last day of quotation with rights was $1.80. Total earnings for the year ended 31 December 20X8 was $7.6 million.

What was the earnings per share for the year?

• $1.35

• $1.36

• $1.27

• $1.06

Waffle Co 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 the earnings per share for the year?

State your answer to two decimal places.

• $0.005

• $0.50

• $0.05

• $0,505

Plumstead Co had 4 million equity shares in issue throughout the year ended 31 March 20X7. On 30 September 20X7 it made a 1 for 4 bonus issue. Profit for the year ended 31 March 20X8 was $3.6 million, out of which an equity dividend of 20c per share was paid. The financial statements for the year ended 31 March 20X7 showed earnings per share (EPS) of $0.70.

What is the EPS for the year ended 31 March 20X8 and the restated EPS for the year ended 31 March 20X7?

20X8 .........................$

20X7 ...........................$

• 20X8 - $ 0.7

  20X7 - $ 0.5

• 20X8 - $ 0.72

  20X7 - $ 0.56

• 20X8 - $ 0.56

  20X7 - $ 0.72

• 20X8 - $ 0.27

  20X7 - $ 0.5

Merlot Co had issued share capital on 1 January 20X9 of 2,000,000 equity $1 shares. On 1 October 20X9, a rights issue was made on a one for four basis which was fully taken up. On 30 September 20X9, each share had a market value of $3.25, giving a theoretical ex-rights value of $2.84 per share.

Using the pull down list to select your answer what is the weighted average number of shares in issue for the year ended 31 December 20X9, in accordance with IAS 33 Earnings per Share?

• 2,341,549 shares

• 1,935,769 shares

• 2,125,000 shares

• 2,431,778 shares