Earnings per Share: Additional practice questions

Q1.Tong plc had issued share capital of 500,000 in ordinary shares at

1 January 2016. The nominal value was 25p per share.

On 31 March 2016, the company made a rights issue of 1 for 4 at a

price of 80 pence per share. The market price of one share immediately before the rights issue was 1, and the issue was completely taken up by shareholders.

The post tax earnings for Tong plc were as follows:

Year ended 31 December 2016: 5.0million

Year ended 31 December 2015: 4.5million

REQUIRED:

i) Calculate the basic earnings per share for 2016.

ii) Calculate and restate the basic earnings per share for 2015.

Q2.A company has profits after tax for the year ending 30 June 2017 of 77,540.

At 1 July 2016 the company had 600,000 shares in issue. On 30 September, the company made a 1 for 6 rights issue at an issue price of 1.15. On that date, the market value of the companys shares was 1.50. The published earnings per share for the year ending 30 June 2016 was 10.8 pence.

What figures should appear in the Income statement for the year ending 30 June 2017 for earnings per share?

30 June 201730 June 2016

(a)11.4 pence 10.8 pence

(b) 11.5 pence10.4 pence

(c) 11.6 pence11.2 pence

(d)11.4 pence10.4 pence