EARNINGS PER SHARE
BPP
Question 1
Barwell Co had 10 million ordinary shares in issue throughout the year ended 30 June 20X3. On
1 July 20X2, it had issued $2 million of 6% convertible loan stock, each $5 of loan stock convertible
into 4 ordinary shares on 1 July 20X6 at the option of the holder.
Barwell Co had profit for the year ended 30 June 20X3 of $1,850,000. It pays tax on profits at
30%.
What was diluted earnings per share for the year?
$0.167
$0.185
$0.161
$0.17
Question 2
At 30 September 20X2 the trial balance of Cavern Co includes the following balances:
$’000
Equity shares of 20c each 50,000
Share premium 15,000
Cavern Co has accounted for a fully subscribed rights issue of equity shares made on 1 April
20X2 of one new share for every four in issue at 42 cents each. This was the only share issue
made during the year.
Using the drag and drop options below, show the balances on the share capital and share
premium accounts at 30 September 20X1.
$’000 Balances
Share Capital
4,000
11,250 Share Premium
37,500
40,000
Question 3
Aqua Co has correctly calculated its basic earnings per share (EPS) for the current year.
Which TWO of the following items need to be additionally considered when calculating the diluted
EPS of Aqua Co for the year?
A 1 for 5 rights issue of equity shares during the year at $1.20 when the market price of the
equity shares was $2.00
The issue during the year of a convertible (to equity shares) loan note
The granting during the year of directors’ share options exercisable in three years’ time
Equity shares issued during the year as the purchase consideration for the acquisition of a
new subsidiary company
Question 4
Many commentators believe that the trend of earnings per share (EPS) is a more reliable indicator
of underlying performance than the trend of net profit for the year.
Which of the following statements supports this view?
Net profit can be manipulated by the choice of accounting policies but EPS cannot be
manipulated in this way
EPS takes into account the additional resources made available to earn profit when new
shares are issued for cash, whereas net profit does not
The disclosure of a diluted EPS figure is a forecast of the future trend of profit
The comparative EPS is restated where a change of accounting policy affects the previous
year’s profits
Question 5
At 1 January 20X8 Artichike Co had 5 million $1 equity shares in issue. On 1 June 20X8, it made
a 1 for 5 rights issue at a price of $1.50. the market price of the shares on the last day of quotation
with rights was $1.80.
Total earnings for the year ended 31 December 20X8 was $7.6 million.
What are the earnings per share for the year?
$1.35
$1.36
$1.27
$1.06
Question 6
The weighted average number of ordinary shares that Fogarty Co has in issue for the year to 31
December 20X7 is 5,000,000.
On 1 January, Fogarty Co issued 500,000 share options to purchase one $1 ordinary share at
$2.80 per share. These options are exercisable between 1 January 20X9 and 31 December 20Y0.
The average market value of each $1 ordinary share of Fogarty Co during the year ended 31
December 20X7 is $3.50.
What is the weighted average number of shares to be used in the calculation of diluted earnings
per share for the year ended 31 December 20X7?
4.9 million
5.1 million
5.4 million
5.5 million
Question 7
Plumstead Co had 4 million equity shares in issue throughout the year ended 31 March 20X7. On
30 September 20X7 it made a 1 for 4 bonus issue. Profit for the year ended 31 March 20X8 was
$3.6 million, out of which an equity dividend of 20c per share was paid. The financial statements
for the year ended 31 March 20X7 showed earnings per share (EPS) of $0.70.
What is the EPS for the year ended 31 March 20X8 and the restated EPS for the year ended 31
March 20X7? (Enter your answer to two decimal places.)
EPS 20X8: $
EPS 20X7: $
Question 8
Bollingbrook Co. has earnings of $313,000 and 100,000 ordinary $1 shares in issue during 20X5.
The company also has in issue $100,000 10% convertible loan stock which is convertible in one
years’ time at a rate of 3 ordinary shares for every $10 of stock. The tax rate is 30%.
What is the diluted earnings per share?
$2.41
$2.46
$2.48
$3.13
KAPLAN
Question 9
Garfish had profits after tax of $3 million in the year ended 31 December 20X7. On 1
January20X7, Garfish had 2.4 million ordinary shares in issue. On 1 April 20X7 Garfish made a
one for two rights issue at a price of $1.40 when the market price of Garfish’s shares was $2.00.
What is the basic earnings per share (to one decimal place) for the year ended 31 December
20X7, according to IAS 33 Earnings Per Share?
_____________ cents.
Question 10
On 1 January 20X4, Sam Co had 3 million ordinary shares in issue. On 1 June 20X4, Sam Co
made a 1 for 3 bonus issue. On 30 September 20X4, Sam Co issued a further 1 million shares at
full market price. Sam Co had profits attributable to ordinary equity holders of $2 million for the
year ended 31 December 20X4.
What is the basic earnings per share figure for the year ended 31 December 20X4,
according to IAS 33 Earnings Per Share?
A. 47.1¢
B. 52.2¢
C. 56.8¢
D. 50.0¢
Question 11
During the year, Mac made a 1 for 3 rights issue at $1.60 when the market price was $2.20.
Last year’s EPS was 81 cents. There were no other issues of shares during the year.
What is the restated earnings per share figure for comparative purposes?
_______________ cents.
Question 12
Coral Co has net profit for the year ended 30 September 20X5 of $10,500,000. Coral has had 6
million shares in issue for many years. On 1 October 20X4 Coral issued a convertible bond. It had
an initial liability element of $2,500,000, and the market interest rate for nonconvertible
instruments is 8%. The bond is convertible in five years, with 50 shares issued for every $100
nominal of convertible bond held. Coral Co pays tax at a rate of 28%
What is the Diluted Earnings per Share figure?
A. 177.4¢
B. 175.0¢
C. 147.6¢
D. 146.8¢
Question 13
Isco’s financial statements show a profit for the year to 31 December 20X5 of $2 million. On 1
January 20X5 Isco had 4 million shares in issue and made no further issues of shares during the
year. At 31 December 20X5 there were 1 million outstanding options to buy shares at $3 each.
For the year to 31 December 20X5, the average market value of Isco’s shares was $5.
What is Isco’s diluted earnings per share for the year ended 31 December 20X5?
A. 50.0¢
B. 28.6¢
C. 45.5¢
D. 43.4¢
Question 14
Gromit Co has the following extract from its consolidated profit or loss account:
$000
Profit for the period 2,800
Other comprehensive income: revaluation gain 500
Total comprehensive income 3,300
Profit for the period attributable to:
Parent 2,250
Non-controlling Interest 550
2,800
Total comprehensive income attributable to:
Parent 2,600
Non-controlling interest 700
3,300
What figure should be used as earnings by Gromit in its earnings per share (EPS)
calculation?
$___________ ,000
Question 15
Which TWO of the following do NOT need to be removed from an entity’s net profit in a
statement of profit or loss in order to calculate the earnings figure to be used in the
earnings per share calculation?
A. Redeemable preference share dividends
B. Irredeemable preference share dividends
C. Profit attributable to the non-controlling interest
D. An error in expenses discovered after the financial statements have been authorised for
issue
E. Ordinary dividends
Question 16
Aqua has correctly calculated its basic earnings per share (EPS) for the current year.
Allocate the items to the appropriate category.
Included within Diluted EPS calculation Included within Basic EPS calculation
Options:
A 1 for 5 rights issue of equity shares during the year at $1.20 when the market price of the
equity shares was $2.00
The issue during the year of a loan note, convertible into ordinary shares
The granting of directors’ share options during the year, exercisable in three years’ time
Equity shares issued during the year as the purchase consideration for the acquisition of a new
subsidiary
Question 17
Many commentators believe that the trend of earnings per share (EPS) is a more reliable indicator
of underlying performance than the trend of the net profit for the year.
Which of the following statements supports this view?
A. Net profit can be manipulated by the choice of accounting policies but EPS cannot be
manipulated in this way.
B. EPS takes into account the additional resources made available to earn profit when new
shares are issued for cash, whereas net profit does not.
C. The disclosure of a diluted EPS figure is a forecast of the trend of profit for future periods.
D. The comparative EPS is restated where a change in accounting policy affects the previous
year’s profits.
Question 18
On 1 October 20X3, Hoy had $2.5 million of equity shares of 50 cents each in issue.
No new shares were issued during the year ended 30 September 20X4, but on that date there
were outstanding share options to purchase 2 million equity shares at $1.20 each. The average
market value of Hoy’s equity shares during the year was $3 per share.
Hoy’s profit after tax for the year ended 30 September 20X4 was $1,550,000.
What is Hoy’s diluted earnings per share for the year ended 30 September 20X4?
A. 25.0¢
B. 31.0¢
C. 26.7¢
D. 22.1¢
ACCA STUDY HUB (QUIZ)
Question 19
A company currently has 10m $1 shares in issue with a market price of $3 per share. The
company wishes to raise new funds using a 1-for-4 rights issue. The theoretical ex rights price
per share is $2.80.
How much new finance was raised by the rights issue?
A. $2.5m
B. $4.0m
C. $5.0m
D. $7.0m
Question 20
In the year to 30 September 20X3, Wexam reported a retained profit of $4.8m after paying
preference dividends of $200,000 and dividends of $800,000 to the holders of the ordinary shares
in issue at the year end. On 1 October 20X2, Wexam had three million shares in issue. On 1 April
20X3, the company had made a bonus issue of one share for every three held.
In accordance with IAS 33 Earnings per Share, what is Wexam’s basic earnings per share
for the year ended 30 September 20X3?
A. $1.20
B. $1.40
C. $1.45
D. $1.60
Question 21
Reploy has reported a profit before interest and tax of $728,654 for the last financial year. The
company’s statement of profit or loss reports an interest expense of $45,860 and a tax expense
of $158,740. The statement of changes in equity shows that an ordinary dividend of $50,000 was
paid. The company’s issued ordinary share capital is $500,000 in $1 shares.
In accordance with IAS 33 Earnings per Share, what is Reploy’s basic earnings per share?
A. $0.95
B. $1.05
C. $1.37
D. $1.46
Question 22
The most recent statement of profit or loss of Waylor reported a profit before tax of $1,258,000
and a tax expense of $224,000. Half way through the year the company had issued 40,000 bonus
shares which brought the total number of shares in issue to 440,000.
In accordance with IAS 33 Earnings per Share, what is Waylor’s basic earnings per share?
A. $2.35
B. $2.47
C. $2.86
D. $2.99
Question 23
Mork has disclosed basic EPS figure for the year of $0.32, this is based on 500,000 ordinary
shares being in issue for the whole year.
Mork also has $100,000 8% convertible debt in issue at the year end. The conversion rights allow
the holders to convert their debt into equity on a basis of 5 shares for every $4 of debt.
Mork pays income tax at a rate of 30%.
In accordance with IAS 33 Earnings per Share, what is Mork’s diluted earnings per share?
A. $0.265
B. $0.269
C. $0.285
D. $0.289
ACCA STUDY HUB (PRACTICE)
Question 24
A company makes a 2-for-3 rights issue at an issue price of $2. The cum-rights price is $4.
What is the theoretical ex rights price?
A. $2.50
B. $2.80
C. $3.00
D. $3.20
Question 25
Chartwell has in issue $120,000 of equity share capital (shares of 50 cents each) and 10,000 6%
Preference shares of $3 each.
Extracts from the financial statements for the year to 31 March 20X3 are shown below:
$
Profit before interest and tax 528,934
Interest paid 6,578
Preference dividend 1,800
Taxation 125,860
Ordinary dividend 10,800
In accordance with IAS 33 Earnings per Share, what is Chartwell’s basic earnings per
share for the year ended 31 March 20X3 (to the nearest cent)? (Answer in $ in the Answer
box)
$
Question 26
In the year to 30 November the retained profit of Dale was $3,640,500. This was after paying
dividends as follows:
Ordinary: $0.05 per share on 1.5 million shares
Preference: $0.07 per share on 600,000 shares
In accordance with IAS 33 Earnings per Share, what is Dale’s basic earnings per share?
A. $1.73
B. $1.77
C. $2.43
D. $2.48
Question 27
The financial statements of Epic showed that retained earnings had increased in the year by
$689,424. The following items were presented by Epic in either the statement of profit or loss for
the year or in the statement of changes in equity:
$
Interest 84,441
Taxation 227,553
Non-controlling interest 47,338
Ordinary dividend ($0.10 per share) 65,000
In accordance with IAS 33 Earnings per Share, what is Epic’s basic earnings per share?
A. $0.10
B. $1.13
C. $1.16
D. $1.23
Question 28
Jubilee reported profit after tax for the period of $1,600,000 and it had one million ordinary shares
in issue for the whole year.
Jubilee had a number of exercisable share options outstanding at the year end. Holders of the
options were entitled to buy 50,000 new shares for $1.60. The average market price of Jubilee’s
shares for the previous 12 months was $2.
In accordance with IAS 33 Earnings per Share, what is Jubilee’s diluted earnings per
share?
Select
$1.52
$1.54
$1.58
$1.60
Question 29
Aqua has correctly calculated its basic earnings per share (EPS) for the current year.
Which TWO of the following items need to be additionally considered when calculating
Aqua’s diluted EPS for the year?
A. A 1 for 5 rights issue of equity shares during the year at $1.20 when the market price of the
equity shares was $2.00
B. The issue during the year of a convertible (to equity shares) loan note
C. The granting during the year of directors’ share options exercisable in three years’ time
D. Equity shares issued during the year as the purchase consideration for the acquisition of a
new subsidiary company
