A trainee accountant of a subsidiary company of Ocean Ltd is seeking advice on how

to account for a rights issue per IAS 33 Earnings per Share.

On 31 December 2021 and 2020 Sea Ltd had a capital structure consisting of:

750,000 1 ordinary shares; and

90,000 11% preference shares.

Net profit for year ended 31 December 2021 was 3,800,000.

Net profit for year ended 31 December 2020 was 2,954,000.

On 31 March 2021, Sea Ltd announced a rights issue with the following details:

Rights: 3 new shares for each 6 held

Issue price: 2.30

The market value of one share in Sea Ltd immediately prior to the

rights issue was 4.40

(6 marks)

Required

Explain, using calculations how the basic earnings per share of Sea Ltd will be

calculated in accordance with IAS 33, Earnings per Share.

(c)

Explain the usefulness of disclosing:

(ii) Diluted earnings per share.