PUZZLE 10.1 BASIC EARNING PER SHARE

Entity A has a profit after tax of $15 million for the year ended December 31, 20X2. These appropriations of profit have not been included in this amount:

$m

1. Arrears of cumulative preference dividend for 2 years ended December 31,20X2 4
2. Ordinary dividends 5
3. Preference share premium payable on redemptionappropriation of profit 1
4. Exceptional profit (net of tax) 4

These share transactions occurred during the year ended December 31, 20X2.

The entity had 3 million ordinary shares of $1 outstanding at January 1, 20X2:

DATE	Ordinary shares issued/purchased	Details
January 1	250,000	Issued at $5 per share - $1 paid to date: entitled to participate in dividends to the extent paid up
April 1	600,000	Full market price $3 per share issue
July 1	(400,000)	Purchase of own shares at $3.5 per share

Required

Calculate basic earnings per share.

PUZZLE 10.2 BASIC EARNING PER SHARE

A (in PUZZLE 10.1) had two-for-one share split on December 31, 20X2, in which two shares were awarded for every share held, and in 20X1 there was a reported basic earnings per share of $3.30.

Required

Show the effect on the basic earnings per share calculated in Case Study 1 and the previous years basic earnings per share. State the effect on your answer if the share split had occurred on February 1, 20X3, before the approval of the financial statements for the year ended December 31 20X2.

PUZZLE 11.1 RIGHT ISSUE

Entity B Net profit available for ordinary shareholders year to

December 31, 20X1 2,100

December 31, 20X2 3,500

The ordinary shares in issue on January 1, 20X2, were 800,000.

Entity B offered existing shareholders a rights issue of one for five shares at a price of $6 per share to be exercised on April 1, 20X2. The market value of Entity Bs shares on that date was $10 per share.

Required

Calculate the basic earnings per share for the years 20X1 and 20X2