Question 2 The following information has been extracted from the financial statements of Henshaw plc for the year ended 31 December 2018: 2018 2017 Profit before Tax 6,870 7,259 Dividends: Preference 420 360 Ordinary 300 260 Required Henshaw plc had issued ordinary share capital of 37,500 shares @ 1 each at the year ended 31 December 2018. Henshaw plc pays corporation tax at the rate of 12.5%. Each of the following should be considered independently of each other. 1. Calculate the basic EPS for 2018 and 2017. (2 marks) 2. On 1 September 2018, Henshaw plc had a bonus issue of 20,000 ordinary shares; calculate the basic EPS for 2018 and 2017, as they would appear in the financial statements for the year ended 31 December 2018. (3 marks) 3. Henshaw plc issued 30,000 ordinary shares on 1 June 2018 at full market price. Calculate the basic EPS for 2018 and 2017, as they would appear in the financial statements for the year ended 31 December 2018. (3 marks) Page 4 of 10 4. On 30 June 2018, when the market price was 2.50 per share, Henshaw plc invited its shareholders to subscribe to a 2 for 3 rights issue at 1.80 per share. Calculate the basic earnings per share for 2018 and the basic EPS for 2017, as they would appear in the 2018 financial statements. (5 marks) (b) Kearney plc has 520,000 ordinary shares at 1 January 2018. During the year ended 31 December 2018, the following potential ordinary shares were outstanding: Share options have been granted to all employees giving them the right to subscribe for ordinary shares between 2020 and 2021 at 9 per share. The number of options outstanding at 31 December 2018 was 120,000. There are 5,500,000 6% convertible preference (nominal value 1) shares in issue with each convertible preference share convertible into 50 shares for every 1,000 convertible shares held. 15,000,000 (nominal value 1) 2% convertible bonds are in issue with each 2,000 bond convertible into 45 ordinary shares. Kearney plc has profits attributable to the 520,000 ordinary shares of 368,000 for the year ended 31 December 2018. The fair value of the ordinary share was 12.50 throughout the year ended 31 December 2018. Kearney plc pays corporation tax at a rate of 12.5%. Required Calculate the diluted EPS of Kearney plc for the year ended 31 December 2018 in accordance with IAS 33, Earnings per Share. (8 marks) (c) It is believed by investors that the EPS figure is an indicator of the success of a company during a financial year. Discuss. (4 marks)