Question

Rosy Ltd determined its profit attributable to ordinary shareholders for the reporting period ended 30 June 2020 as $1,450,000. The number of ordinary shares on issue up to 1 October 2019 was 1,000,000. Rosy Ltd announced a three-for-five bonus issue (three bonus shares for every five shares held) of shares effective for each ordinary share outstanding at this date. Required: What is the basic earnings per share for the year ended 30 June 2020 (keep two decimal places)

Answer 1

Calculation of Weighted average number of equity shares:

No.of shares Outstanding = Rs.1,000,000

Bonus shares issued I.e., three bonus shares for every five shares held

1,000,000 - 5

- 3

Bonus shares = 1,000,000*3/5 = 600,000

(NOTE: As per AS 20, when bonus shares are issued during the year, it should be calculated in the weighted average from the beginning of reporting period irrespective of issue date)

Total weighted average no.of shares during the year = 1,000,000+600,000

= 1600,000

Net profit = 1,450,000

Basic Earning per share (EPS) = 1,450,000/1600,000

= 0.906

Basic EPS= 0.906