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# AFA_Lec_34 - Advanced Financial Accounting Lecture-34...

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Advanced Financial Accounting Lecture-34 Earnings Per Share

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Question-1 On 30 September 2002, B & Co. made an issue at full market price of 1,000,000 ordinary shares. The company’s accounting year runs from 1 Jan. to 31 Dec. Relevant information for 2001 and 2002 is as follow: 2001 2002 Shares issue at 31 Dec. 8,000,000 9,000,000 Profit after tax 3,280,000 3,300,000 Required: Calculate EPS for 2001 and 2002.
Solution Weighted average number of shares 2001 8,000,000 2002 Already issued 8,000,000 30 Sep. 2002 Fresh shares issued (1,000,000 x 3/12) 250,000 8,250,000

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Solution EPS = Earnings available for ordinary shareholders Weighted average No. of ordinary shares outstanding during the year EPS (2001) = 3,280,000 / 8,000,000 = Rs. 0.41 per share EPS (2002) = 3,300,000 / 8,250,000 = Rs. 0.40 per share
Bonus Share

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Question-2 2008 2009 Earnings / Profit Rs. 75,000 Rs. 80,000 Share at 1 Jan. 400,000 400,000 Bonus issue 100,000 100,000 Total shares 500,000 500,000 At 30 Sep. 2002 company made 100,000 shares as bonus issue. Required: Calculate EPS for 2008 and 2009
Solution EPS (2008) = 75,000 / 500,000 = Rs. 0.15 per share EPS (2009) = 80,000 / 500,000 = Rs. 0.16 per share

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Right Issue
Question-3 A company has 10,000 shares in issue. It now proposes to make 1 for 4 shares rights issue at a price Rs. 3 per share. The market value of existing share is Rs. 5 per share.

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