Co urse: FR2202 Finan x .. GEN-CASS-PASTEXAN × \\Exam Timetables! City \\ G Expl

Question

Co urse: FR2202 Finan x .. GEN-CASS-PASTEXAN × Exam Timetables! City G Explain how you w %20 %20Financial%20Accounting%20Questions%20-%20January%20201 7%20FINAL.pdf a) Answer the following two questions that relate to Earnings per Share i. Sinbad plc had the same 10 million ordinary shares in issue on both 1 January 20x1 and 31 December 20X1. On 1 January 20X1 the company issued 1,200,000 $1 units of 5% convertible loan stock. Each unit of stock is convertible into 4 ordinary shares on 1 January 20X9 at the option of the holder. The following is an extract from Sinbad plc's income statement for the year ended 31 December 20x1: $000 Profit before interest and tax Interest payable on 5% convertible loan stock Profit before tax Income tax expense (at 30%) Profit for the year 980 920 Required: Calculate the basic and diluted earnings per share for the year ended 31 Decembers 20X1.

Explanation / Answer

1) Basic Earning per share = Adjusted Net profit (See Note) = 686 = 0.0686 $ Per Share

Number of existing shares 10000

2) Diluted earning per Share $000

a Interest expense for the current Year = 60

b Tax relating to interest expense(30%) = 18

c Adjusted Net Profit for the year ( 644+ (60-18) = 686

d Number of equity share resulting from conversion = 1200

e Total number of equity shares to compute diluted earning per share (Old+ Convertibles) (10000+1200) = 11200

f Diluted earning per share = Adjusted Profit for the year   = d = 686 = 0.06125 $ Per share

Total number of equity share e 11200

Basic Earning Per Share = $ 0.0686 per share

Diluted earning per Share= $ 0.06125 per share

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.