Contingently issuable shares (including those subject to recall) are included in the computation when all necessary conditions for issue have been satisfied. (IAS 33: para. 24)
Basic EPS
Question
Flame Co is a company with a called up and paid up capital of 100,000 ordinary shares of $1 each and 20,000 10% redeemable preference shares of $1 each.
The gross profit was $200,000 and trading expenses were $50,000. Flame Co paid the required preference share dividend and an ordinary dividend of 42c per share. The tax charge for the year was estimated at $40,000.
Calculate basic EPS for the year.
Answer
FLAME CO
TRADING RESULTS FOR YEAR TO 31 DECEMBER
Gross profit
Expense (50,000 + 2,000 preference dividend)
Profit before tax
Income tax expense
Profit for the year
|
$ 200,000 (52,000) 148,000 (40,000) 108,000
|
EARNINGS PER SHARE
108,000 = $1.08
100,000
FAST FORWARD
3 Effect on EPS of changes in capital structure
You should know how to calculate basic EPS and how to deal with related complications (issue of shares for cash, bonus issues, rights issues).
Introduction
We looked at the effect of issues of new shares on basic EPS above. In these situations, the corresponding figures for EPS for the previous year will be comparable with the current year because, as the weighted average number of shares has risen, there has been a corresponding increase in resources. Money (or other assets) has been received when shares were issued. It is assumed that shares are issued at full market price.
Do'stlaringiz bilan baham: |
