ACCA FR · Chapter 10 · Question 4 of 9
At 1 January Shoveler Co had 6 million shares in issue. On 1 October it made a 1 for 5 rights issue at $2.00 per share. The market price just before the issue (cum rights) was $3.20. Earnings for the year ended 31 December were $9,900,000. What is basic EPS?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 150 cents
Explanation
TERP = (5 x $3.20 + 1 x $2.00) / 6 = $3.00. Bonus fraction = $3.20/$3.00. Weighted average = 6m x 3.2/3.00 x 9/12 + 7.2m x 3/12 = 4.8m + 1.8m = 6.6m. EPS = $9,900,000 / 6.6m = 150 cents.
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