Question

Question 1

There were 1 000 000 shares in issued share capital on 1 January 2001. Transactions for the year ended 31 December 2001 are:

i Date Details 1 May 2001 100 000 shares are issued to purchase a specialized machine

ii 1 September 2001 200 000 shares are issued to raise cash for a project. Calculate the weighted average number of shares

Question 2

Sandy Ltd had 500 000 ordinary shares in issue until 31 October 2006 when it made a bonus issue of 150 000 shares. Total earnings of R100 000 were earned for the year ended 31 December 2006, and EPS for 2005 was calculated as R0.30. Calculate EPS for 2006:

Question 3

You are the financial accountant of Rabbit (Pty) Ltd and are preparing the financial statements for the year ended 30 June 2003. The AGM is scheduled to be held on 12 August 2003, on which date the financial statements are to be approved by the directors. The following matters come to your attention: i. On 1 August the Accountant uncovered a serious fraud, amounting to R500 000. The trade payables clerk had created a fictitious supplier account, issuing false invoices to the company, and was then single-handedly diverting funds into a dummy bank account. The clerk has subsequently been fired and the matter was reported to police. ii. The company paid a dividend on 13 June 2003, to all shareholders on the share register as at 3 June 2003. However, during July 2003, the company has sustained cash shortages ( owing to large trade payables made in early July). As a result, the company has requested a return of a portion of the dividend payment from its shareholders. Required: Assuming todays date is 5 August 2003, discuss whether the matters noted above require amendment in the financial statements for the year ended 30 June 2003

Answer 1

As per policy, only one question is allowed to answer at a time, so answering first two questions for you here:

Q1) Weighted Average number of shares:
Date	Number of shares	months outstanding	Weighted Avg. shares
1/1/2001	1000000	12	1000000
5/1/2001	100000	8	66667
9/1/2001	200000	4	66667
total Weighted Avg. number of shares =			1133333
Q2) First outstanding shares for the year:
	No. of shares	Weighted Avg. outstanding
For full year of 2006	500000	500000*12/12 = 500000
For Nov & Dec, 2006	150000	150000*2/12 = 25000
Total Outstanding for EPS calculation =		525000
EPS FOR 2006 = TE/SH O/S = 100000/525000
EPS FOR 2006 = R0.19/share