Question Tag: Diluted EPS

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  • 12 Marks

CR – Nov 2021 – L3 – Q2b – Earnings Per Share (IAS 33)

Calculate basic and diluted earnings per share (EPS) from Nsukka Plc’s consolidated financial statements.

b. The following financial information relates to Nsukka Group for the year ended June 30, 2021.

Nsukka Group Consolidated Statement of Financial Position as at June 30, 2021

Additional Information:

  1. Nsukka PLC reports a profit after tax, after adjusting for all current year accounting issues, of N1,850,000 and an effective tax rate of 20%.
  2. For the first time, Nsukka PLC issued 1,000,000 ordinary shares and granted options for 400,000 shares on July 1, 2020. The exercise price was the market price of N1.50 per share at the grant date. Options vest on July 1, 2020, and expire on June 30, 2022. The average market price of shares in Nsukka Plc during the year ended June 30, 2022, was N1.834.
  3. A rights issue of 1 for every 20 shares was made on May 31, 2021, at a price of N1.30 per share. The market price at this date was N1.60, and the average price for the year to June 30, 2021, was N1.65.
  4. Nsukka PLC has N1,000,000 of 6% convertible loans included in other non-current liabilities. These were in issue throughout the year and may be converted into 100,000 ordinary shares. No loans were converted during the year. There are no dividends in arrears on the 3% preference shares.

Required:

Evaluate basic and diluted earnings per share from the consolidated statement of financial position as at June 30, 2021, for Nsukka Plc.
(12 Marks)

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  • 20 Marks

CR – Nov 2020 – L3 – Q2 – Earnings Per Share (IAS 33)

Calculate EPS under various scenarios for Goodwin plc and explain EPS use in investment decisions, including examples of potential ordinary shares.

Goodwin plc
Statement of profit or loss extract for the year ended December 31, 2019

As at January 1, 2019, the issued share capital of Goodwin plc was as follows:

  • 23,000 6% preference shares of N1 each
  • 20,700 ordinary shares of N1 each

Required: Calculate the basic and diluted earnings per share for the year ended December 31, 2019 under the following circumstances:

a. Where there is no change in the issued share capital. (5 Marks)

b. The company made a bonus issue of one ordinary share for every four shares in issue at September 30, 2019. (3 Marks)

c. The company made a rights issue of shares on October 1, 2019 in the proportion of 1 for every 5 shares held at a price of N1.20. The middle market price for the shares on the last day of quotation cum rights was N1.80 per share. (8 Marks)

d. Briefly discuss how investors use the EPS ratio in investment decisions and give TWO examples of potential ordinary shares under IAS 33. (4 Marks)

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  • 3 Marks

FR – Nov 2022 – L2 – Q6a – Potential Ordinary Shares in EPS Calculation

Explain potential ordinary shares with three examples as per IAS 33.

IAS 33 – Earnings Per Share (EPS) requires entities to calculate basic and diluted earnings per share. However, diluted EPS and basic EPS will usually differ when there are potential ordinary shares in existence.
Required:

i. Explain the term “potential ordinary share” and provide THREE examples as stated in IAS 33. (3 Marks)
ii. Describe the procedure for ranking when there are several types of potential ordinary share in issue when calculating diluted EPS.
(3 Marks)

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  • 7 Marks

FR – Nov 2022 – L2 – Q6b – Potential Ordinary Shares

Rank the types of potential ordinary shares and calculate the diluted EPS for Jumai Nigeria Limited.

The following information relates to Jumai Nigeria Limited for the year ended December 31, 2020.
Issued ordinary shares of 50k each N3,000,000
Profit for the year N18,000,000
Average market price of shares during the year was N70 per share. The potential financial instruments in existence in the company are detailed below:
i. 800,000 options with exercise price of N52.50.
ii. 5% convertible bond of N6,000,000. Each bond is convertible in year 2025 into ordinary shares at the rate of 30 new shares for every N100 bonds.
iii. 200,000 8% convertible preference shares at N10 per share. Each preference share is convertible in year 2024 at the rate of one ordinary share for every 25 preference shares held. The Company income tax rate is 30%. Assume that all the options are exercised.
Required:
Rank the potential ordinary shares and calculate the diluted EPS for the year ended December 31, 2020. (7 Marks)

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  • 4 Marks

FR – May 2021 – L2 – Q2c – Basic and Diluted Earnings Per Share under IAS 33

Calculate basic and diluted earnings per share based on the financial information provided.

Dome Ltd has 5,000,000 ordinary shares in issue and also had in issue in 2020:

  • GH¢1,000,000 of 14% convertible loan stock, convertible in three years at the rate of 2 shares for every GH¢10 of stock.
  • GH¢2,000,000 of 10% convertible loan stock, convertible in a year’s time at the rate of 3 shares for every GH¢5 of stock.

The total earnings in 2020 were GH¢1,750,000. The rate of income tax is 35%.

Required:
In accordance with IAS 33: Earnings Per Share, calculate the basic and diluted earnings per share.
(4 marks)

 

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  • 12 Marks

FR – May 2016 – L2 – Q3a – Financial Reporting Standards and Their Applications

Calculate basic and diluted earnings per share for Ghana Trust for the years ended 31st March 2014 and 2015.

(i) The issued share capital of Ghana Trust, a publicly listed company on the Ghana Stock Exchange, at 31st March 2013 was GH¢10 million. Its shares are denominated at 25 pesewas each. Ghana Trust’s earnings attributable to its ordinary shareholders for the year ended 31st March 2013 were also GH¢10 million, giving an earnings per share of 25 pesewas.

Year ended 31st March 2014:
On 1st July 2013, Ghana Trust issued eight million ordinary shares at full market price. On 1st January 2014, a bonus issue of one new ordinary share for every four ordinary shares held was made. Earnings attributable to ordinary shareholders for the year ended 31st March 2014 were GH¢13.8 million.

Year ended 31st March 2015:
On 1st October 2014, Ghana Trust made a rights issue of shares of two new ordinary shares at a price of GH¢1.00 each for every five ordinary shares held. The offer was fully subscribed. The market price of Ghana Trust’s ordinary shares immediately prior to the offer was GH¢2.40 each. Earnings attributable to shareholders for the year ended 31st March 2015 were GH¢19.5 million.

Required:
Calculate Ghana Trust’s earnings per share for the years ended 31st March 2014 and 2015 including comparative figures. (7 marks)

(ii) On 1st April 2015, Ghana Trust issued GH¢20 million 8% convertible loan stock at par. The terms of the conversion (on 1st April 2018) are that for every GH¢100 of loan stock, 50 ordinary shares will be issued at the option of loan stockholders. Alternatively, the loan stock will be redeemed at par for cash. Also, on 1st April 2015, the directors of Ghana Trust were awarded share options on 12 million ordinary shares exercisable from 1st April 2018 at GH¢1.50 per share. The average market value of Ghana Trust’s ordinary shares for the year ended 31st March 2015 was GH¢2.50 each. The income tax rate is 25%. Earnings attributable to ordinary shareholders for the year ended 31st March 2015 were GH¢25,200,000. The share options have been correctly recorded in the statement of profit or loss.

Required:
Calculate Ghana Trust’s basic and diluted earnings per share for the year ended 31st March 2015. (5 marks)

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  • 10 Marks

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

a) The following information was extracted from the financial statements of Tofiakwa Plc for the financial year-end 30 June 2023 to determine the year’s basic earnings per share and diluted earnings per share:

Item Amount (GH¢)
Profit after tax from continuing operations 1,925,000
Non-controlling interests’ profit 200,000
Ordinary shares, 150,000 issued at GH¢2 300,000
(This figure includes an additional 50,000 ordinary shares issued on 1/10/2022 for cash)
5% non-cumulative preference shares, 500,000 issued at GH¢1 500,000
Average market price for one ordinary share during the year 15

Additional Information:

  • Tofiakwa Plc entered into a market transaction on 1 December 2022 to repurchase 12,000 ordinary shares at fair value.
  • 20% convertible debentures: 4,000 debentures with an issue value of GH¢1,000 per debenture. Each debenture is convertible into ten ordinary shares. Holders of 3,800 convertible debentures converted their holdings into ordinary shares on 1 May 2023.
  • The tax rate is 30%.

Required:
For Tofiakwa Plc for the year ending 30 June 2023, calculate:
i) The basic earnings per share. (5 marks)
ii) The diluted earnings per share. (5 marks)

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  • 12 Marks

CR – Nov 2021 – L3 – Q2b – Earnings Per Share (IAS 33)

Calculate basic and diluted earnings per share (EPS) from Nsukka Plc’s consolidated financial statements.

b. The following financial information relates to Nsukka Group for the year ended June 30, 2021.

Nsukka Group Consolidated Statement of Financial Position as at June 30, 2021

Additional Information:

  1. Nsukka PLC reports a profit after tax, after adjusting for all current year accounting issues, of N1,850,000 and an effective tax rate of 20%.
  2. For the first time, Nsukka PLC issued 1,000,000 ordinary shares and granted options for 400,000 shares on July 1, 2020. The exercise price was the market price of N1.50 per share at the grant date. Options vest on July 1, 2020, and expire on June 30, 2022. The average market price of shares in Nsukka Plc during the year ended June 30, 2022, was N1.834.
  3. A rights issue of 1 for every 20 shares was made on May 31, 2021, at a price of N1.30 per share. The market price at this date was N1.60, and the average price for the year to June 30, 2021, was N1.65.
  4. Nsukka PLC has N1,000,000 of 6% convertible loans included in other non-current liabilities. These were in issue throughout the year and may be converted into 100,000 ordinary shares. No loans were converted during the year. There are no dividends in arrears on the 3% preference shares.

Required:

Evaluate basic and diluted earnings per share from the consolidated statement of financial position as at June 30, 2021, for Nsukka Plc.
(12 Marks)

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  • 20 Marks

CR – Nov 2020 – L3 – Q2 – Earnings Per Share (IAS 33)

Calculate EPS under various scenarios for Goodwin plc and explain EPS use in investment decisions, including examples of potential ordinary shares.

Goodwin plc
Statement of profit or loss extract for the year ended December 31, 2019

As at January 1, 2019, the issued share capital of Goodwin plc was as follows:

  • 23,000 6% preference shares of N1 each
  • 20,700 ordinary shares of N1 each

Required: Calculate the basic and diluted earnings per share for the year ended December 31, 2019 under the following circumstances:

a. Where there is no change in the issued share capital. (5 Marks)

b. The company made a bonus issue of one ordinary share for every four shares in issue at September 30, 2019. (3 Marks)

c. The company made a rights issue of shares on October 1, 2019 in the proportion of 1 for every 5 shares held at a price of N1.20. The middle market price for the shares on the last day of quotation cum rights was N1.80 per share. (8 Marks)

d. Briefly discuss how investors use the EPS ratio in investment decisions and give TWO examples of potential ordinary shares under IAS 33. (4 Marks)

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  • 3 Marks

FR – Nov 2022 – L2 – Q6a – Potential Ordinary Shares in EPS Calculation

Explain potential ordinary shares with three examples as per IAS 33.

IAS 33 – Earnings Per Share (EPS) requires entities to calculate basic and diluted earnings per share. However, diluted EPS and basic EPS will usually differ when there are potential ordinary shares in existence.
Required:

i. Explain the term “potential ordinary share” and provide THREE examples as stated in IAS 33. (3 Marks)
ii. Describe the procedure for ranking when there are several types of potential ordinary share in issue when calculating diluted EPS.
(3 Marks)

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  • 7 Marks

FR – Nov 2022 – L2 – Q6b – Potential Ordinary Shares

Rank the types of potential ordinary shares and calculate the diluted EPS for Jumai Nigeria Limited.

The following information relates to Jumai Nigeria Limited for the year ended December 31, 2020.
Issued ordinary shares of 50k each N3,000,000
Profit for the year N18,000,000
Average market price of shares during the year was N70 per share. The potential financial instruments in existence in the company are detailed below:
i. 800,000 options with exercise price of N52.50.
ii. 5% convertible bond of N6,000,000. Each bond is convertible in year 2025 into ordinary shares at the rate of 30 new shares for every N100 bonds.
iii. 200,000 8% convertible preference shares at N10 per share. Each preference share is convertible in year 2024 at the rate of one ordinary share for every 25 preference shares held. The Company income tax rate is 30%. Assume that all the options are exercised.
Required:
Rank the potential ordinary shares and calculate the diluted EPS for the year ended December 31, 2020. (7 Marks)

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  • 4 Marks

FR – May 2021 – L2 – Q2c – Basic and Diluted Earnings Per Share under IAS 33

Calculate basic and diluted earnings per share based on the financial information provided.

Dome Ltd has 5,000,000 ordinary shares in issue and also had in issue in 2020:

  • GH¢1,000,000 of 14% convertible loan stock, convertible in three years at the rate of 2 shares for every GH¢10 of stock.
  • GH¢2,000,000 of 10% convertible loan stock, convertible in a year’s time at the rate of 3 shares for every GH¢5 of stock.

The total earnings in 2020 were GH¢1,750,000. The rate of income tax is 35%.

Required:
In accordance with IAS 33: Earnings Per Share, calculate the basic and diluted earnings per share.
(4 marks)

 

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  • 12 Marks

FR – May 2016 – L2 – Q3a – Financial Reporting Standards and Their Applications

Calculate basic and diluted earnings per share for Ghana Trust for the years ended 31st March 2014 and 2015.

(i) The issued share capital of Ghana Trust, a publicly listed company on the Ghana Stock Exchange, at 31st March 2013 was GH¢10 million. Its shares are denominated at 25 pesewas each. Ghana Trust’s earnings attributable to its ordinary shareholders for the year ended 31st March 2013 were also GH¢10 million, giving an earnings per share of 25 pesewas.

Year ended 31st March 2014:
On 1st July 2013, Ghana Trust issued eight million ordinary shares at full market price. On 1st January 2014, a bonus issue of one new ordinary share for every four ordinary shares held was made. Earnings attributable to ordinary shareholders for the year ended 31st March 2014 were GH¢13.8 million.

Year ended 31st March 2015:
On 1st October 2014, Ghana Trust made a rights issue of shares of two new ordinary shares at a price of GH¢1.00 each for every five ordinary shares held. The offer was fully subscribed. The market price of Ghana Trust’s ordinary shares immediately prior to the offer was GH¢2.40 each. Earnings attributable to shareholders for the year ended 31st March 2015 were GH¢19.5 million.

Required:
Calculate Ghana Trust’s earnings per share for the years ended 31st March 2014 and 2015 including comparative figures. (7 marks)

(ii) On 1st April 2015, Ghana Trust issued GH¢20 million 8% convertible loan stock at par. The terms of the conversion (on 1st April 2018) are that for every GH¢100 of loan stock, 50 ordinary shares will be issued at the option of loan stockholders. Alternatively, the loan stock will be redeemed at par for cash. Also, on 1st April 2015, the directors of Ghana Trust were awarded share options on 12 million ordinary shares exercisable from 1st April 2018 at GH¢1.50 per share. The average market value of Ghana Trust’s ordinary shares for the year ended 31st March 2015 was GH¢2.50 each. The income tax rate is 25%. Earnings attributable to ordinary shareholders for the year ended 31st March 2015 were GH¢25,200,000. The share options have been correctly recorded in the statement of profit or loss.

Required:
Calculate Ghana Trust’s basic and diluted earnings per share for the year ended 31st March 2015. (5 marks)

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  • 10 Marks

CR – Nov 2023 – L3 – Q2a – IAS 33: Earnings Per Share

Calculation of basic and diluted earnings per share for Tofiakwa Plc, and advice on depreciation and decommissioning cost for Odehyieba Plc.

a) The following information was extracted from the financial statements of Tofiakwa Plc for the financial year-end 30 June 2023 to determine the year’s basic earnings per share and diluted earnings per share:

Item Amount (GH¢)
Profit after tax from continuing operations 1,925,000
Non-controlling interests’ profit 200,000
Ordinary shares, 150,000 issued at GH¢2 300,000
(This figure includes an additional 50,000 ordinary shares issued on 1/10/2022 for cash)
5% non-cumulative preference shares, 500,000 issued at GH¢1 500,000
Average market price for one ordinary share during the year 15

Additional Information:

  • Tofiakwa Plc entered into a market transaction on 1 December 2022 to repurchase 12,000 ordinary shares at fair value.
  • 20% convertible debentures: 4,000 debentures with an issue value of GH¢1,000 per debenture. Each debenture is convertible into ten ordinary shares. Holders of 3,800 convertible debentures converted their holdings into ordinary shares on 1 May 2023.
  • The tax rate is 30%.

Required:
For Tofiakwa Plc for the year ending 30 June 2023, calculate:
i) The basic earnings per share. (5 marks)
ii) The diluted earnings per share. (5 marks)

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