ACCA FR · Chapter 10 · Question 3 of 9
Garganey Co had 8 million shares in issue until 1 July 20X6, when it made a 1 for 4 bonus issue. Earnings for 20X6 were $5,000,000. Basic EPS reported for 20X5 was 55 cents. What are basic EPS for 20X6 and the restated EPS for 20X5?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 20X6: 50 cents; 20X5 restated: 44 cents
Explanation
A bonus issue brings in no resources, so the new shares are treated as if they had always been in issue. Shares = 8m x 5/4 = 10m, and 20X6 EPS = $5,000,000 / 10m = 50 cents. The comparative is restated by multiplying by the inverse of the bonus fraction: 55c x 4/5 = 44 cents.
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