ExpertHard2 marksShort Answer
ACCA · Question 12 · Financial Reporting
Section A
PixelPlay E-Sports had 2,000,000 ordinary shares in issue on 1 January 20X9. On 1 April 20X9, the company made a 1-for-4 rights issue at $1.50 per share. The market value of the shares immediately before the rights issue was $2.50. Profit after tax for the year ended 31 December 20X9 was $850,000.
Calculate the basic Earnings Per Share (EPS) for the year ended 31 December 20X9. (State your answer in dollars to two decimal places, e.g., 0.35)
Section A
PixelPlay E-Sports had 2,000,000 ordinary shares in issue on 1 January 20X9. On 1 April 20X9, the company made a 1-for-4 rights issue at $1.50 per share. The market value of the shares immediately before the rights issue was $2.50. Profit after tax for the year ended 31 December 20X9 was $850,000.
Calculate the basic Earnings Per Share (EPS) for the year ended 31 December 20X9. (State your answer in dollars to two decimal places, e.g., 0.35)
How to approach this question
1. Calculate the Theoretical Ex-Rights Price (TERP). 2. Calculate the bonus fraction (Market Price / TERP). 3. Calculate the weighted average number of shares, applying the bonus fraction to the shares before the rights issue. 4. Divide profit by the weighted average shares.
Full Answer
.
Common mistakes
Forgetting to apply the bonus fraction to the period before the rights issue.
Practice the full ACCA FR — Financial Reporting Practice Exam 6
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