INTER C.A.
– ADVANCED ACCOUNTING
CLASSWORK QUESTIONS
Question 1
Date Particulars Purchased Sold Balance
1st January Balance at beginning of year 1,800 - 1,800
31st May Issue of shares for cash 600 - 2,400
1st November Buy Back of shares - 300 2,100
Calculate Weighted Number of Shares.
Question 2
Net profit for the year 31.3.2016 ` 18,00,000
Net profit for the year 31.3.2017 ` 60,00,000
No. of equity shares outstanding until 31.3.2016 20,00,000
Bonus issue 1st October 2016 was 2 equity shares for each equity share outstanding at
31.3.2016.
Calculate Basic Earnings Per Share and Adjusted Earnings Per Share.
Question 3
Given below is the information regarding the capital of a company 40,00,000 equity
shares @ 3.50 = 1,40,00,000
9 months later the Company had issued 1 share for 4 shares held given rights to existing
shareholder @ 2.80.
Find out bonus element in right issue and WANES.
Question 4
Net profit for the year 2016 ` 11,00,000
Net profit for the year 2017 ` 15,00,000
No. of shares outstanding prior to rights issue 5,00,000 shares
Rights issue price ` 15.00
Last date to exercise rights 1st March 2017
Rights issue is one new share for each five outstanding (i.e. 1,00,000 new shares)
Fair value of one equity share immediately prior to exercise of rights on 1st March 2017
was ` 21.00. Compute Basic Earnings per share of 2016 & 2017. Also calculate restated
EPS of 2016.
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Question 5
Net profit for the current year ` 1,00,00,000
No. of equity shares outstanding 50,00,000
Basic earnings per share ` 2.00
No. of 12% convertible debentures of 100 each 1,00,000
Each debenture is convertible into 10 equity shares
Interest expense for the current year ` 12,00,000
Tax relating to interest expense (30%) ` 3,60,000
Compute Diluted Earnings Per Share.
Question 6
From the following information pertaining to A Ltd., compute BEPS and DEPS
Profit available for equity shareholders = 20,00,000
Equity Share Capital of ` 10 each = 8,00,000
Convertible 12% Preference share of ` 100 = 16,00,000
Each preference share is convertible into 2 equity shares.
Question 7
Net profit for the year 2017 12,00,000
Weighted average number of equity shares outstanding during the 5,00,000 shares
year 2017
Average fair value of one equity share during the year 2017 20.00
Weighted average number of shares under option during the year 1,00,000 shares
2017
Exercise price for shares under option during the year 2017 15.00
Compute Basic and Diluted Earnings Per Share.
Question 8
“In the following list of shares issued, for the purpose of calculation of weighted average
number of shares, from which date weight is to be considered:
(i) Equity Shares issued in exchange of cash,
(ii) Equity Shares issued as a result of conversion of a debt instrument,
(iii) Equity Shares issued in exchange for the settlement of a liability of the enterprise,
(iv) Equity Shares issued for rendering of services to the enterprise,
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(v) Equity Shares issued in lieu of interest and/or principal of an other financial
instrument,
(vi) Equity Shares issued as consideration for the acquisition of an asset other than in
cash.
Also define Potential Equity Share.
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HOMEWORK SECTION
Question 9
Net profit for the year 2012 : ` 24,00,000
Weighted average number of equity shares outstanding during the year 2012: ` 10,00,000
Average Fair value of one equity share during the year 2012 : ` 25.00
Weighted average number of shares under option during the year 2012: ` 2,00,000
Exercise price for shares under option during the year 2012 : ` 20.00
Compute Basic and diluted earnings per share.
Question 10
In April, 2010, A Limited issued 18,00,000 Equity shares of ` 10 each, ` 5 per share was
called up on that date which was paid by all the shareholders. The remaining ` 5 was
called up on 1-9-2010. All the Shareholders (except one having 3,60,000 shares) paid
the sum in September 2010. The net profit for the year ended 31-3-2011 is ` 33 lakhs
after dividend on preference shares and dividend distribution tax of ` 6.60 lakhs.
Compute the basic EPS for the year ended 31st March, 2011 as per AS 20.
Question 11
“While calculating diluted earning per share, effect is given to all dilutive potential equity
shares that were outstanding during that period.” Explain. Also calculate the diluted
earnings per share from the following information:
Net profit for the current year ` 85,50,000
No. of equity shares outstanding 20,00,000
No. of 8% convertible debentures of ` 100 each 1,00,000
Each debenture is convertible into 10 equity shares
Interest expenses for the current year 6,00,000
Tax relating to interest expenses 30%
Question 12
Compute Basic Earnings per share from the following information:
Date Particulars No. of shares
1st April, 2008 Balance at the beginning of the year 1,500
1st August, 2008 Issue of shares for cash 600
31st March, 2009 Buy back of shares 500
Net profit for the year ended 31st March, 2009 was ` 2,75,000.
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Date No. of equity shares Period Weights Weighted
outstanding (months) average number
of shares
(1) (2) (3) (4) (5) = (2) x (4)
1st April, 2008 1,500 (Opening) 12 months 12/12 1,500
1st August, 2008 600 8 months 8/12 400
(Additional issue)
31st March,2009 500 (Buy back) 0 months 0/12 -
Total 1,900
Basic EPS = 275000/1900 shares = 144.74
Question 13
Ram Ltd. had 12,00,000 equity shares on April 1, 2009. The company earned a profit of `
30,00,000 during the year 2009-10. The average fair value per share during 2009-10
was ` 25. The company has given share option to its employees of 2,00,000 equity shares
at option price of `15. Calculate basic E.P.S. and diluted E.P.S.
Computation of Earnings Per Share
Earnings Shares Earnings per
` share `
Net Profit for the year 2009-10 30,00,000
Weighted average number of shares 12,00,000
outstanding during the year 2009-10 2.50
Basic Earning Per Share
30,00,000 2,00,000
12,00,000
Number of shares under option (1,20,000)
Number of shares that would have been
issued at fair value (As indicated in Working 2.34
Note)
[2,00,000 x 15 ] 30,00,000 12,80,000
25
Diluted Earnings Per Share
30,00,000
12,80,000
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Working Note:
The earnings have not been increased as the total number of shares has been increased
only by the number of shares (80,000) deemed for the purpose of the computation to
have been issued for no consideration
Question 14
From the following information relating to Y Ltd. Calculate Earnings Per Share (EPS):
PART A
` in crores
Profit before V.R.S. payments but after depreciation 75.00
Depreciation 10.00
VRS payments 32.10
Provision for taxation 10.00
Fringe benefit tax 5.00
Paid up share capital (shares of ` 10 each fully paid) 93.00
` in crores
Profit after depreciation but before VRS Payment 75.00
Less: Depreciation – No. adjustment required -
VRS payments 32.10
Provision for taxation 10.00
Fringe benefit tax 5.00 (47.10)
Net Profit 27.90
No. of shares 9.30 crores
EPS = Net profit/ No. of Shares
= 27.9/9.30 = 3 per share
Question 15
XYZ Ltd. had issued 30,000, 15% convertible debentures of ` 100 each on 1st April, 2008.
The debentures are due for redemption on 1st March, 2011. The terms of issue of debentures
provided that they were redeemable at a premium of 5% and also conferred option to the
debenture holders to convert 20% of their holding into equity shares (Nominal Value ` 10)
at a price of ` 15 per share. Debenture holders holding 2500 debentures did not exercise
the option. Calculate the number of equity shares to be allotted to the Debenture holders
exercising the option to the maximum.
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No. of debenture
Total number of debentures 30,000
Less: Debenture holders not opted for conversion (2,500) 27,500
20%
Option for conversion 5,500
Number of debentures for conversion (27,500 x 20)
100 ` 5,77,500
Redemption value at a premium of 5% (5,500 x ` 105) 38,500 shares
Number of equity shares to be allotted ` 5,77,500
`15
Question 16
(i) Explain the concept of ‘weighted average number of equity shares outstanding
during the period’. State how would you compute, based on AS-20, the weighted
average number of equity shares in the following case:
No. of shares
1st April, 2010 Balance of equity shares 7,20,000
31st August, 2010 Equity shares issued for cash 2,40,000
1st February, 2011 Equity shares bought back 1,20,000
31st March, 2011 Balance of equity shares 8,40,000
(ii) Compute adjusted earnings per share and basic EPS based on the following
information:
Net profit 2009-10 ` 7,20,000
Net profit 2010-11 ` 24,00,000
No. of equity shares outstanding until 31st December, 2010 8,00,000
Bonus issue on 1st January, 2011, 2 equity shares for each equity share outstanding
at 31st December, 2010.
(i) As per para 16 of AS 20, “Earnings Per Share”, the weighted average number of
equity shares outstanding during the period reflects the fact that the amount of
shareholders’ capital may have varied during the period as a result of a larger or
less number of shares outstanding at any time. For the purpose of calculating basic
earnings per share, the number of equity shares should be the weighted average
number of equity shares outstanding during the period.
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Weighted average number of equity shares
7,20,000 X 5/12 = 3,00,000 shares
9,60,000 X 5/12 = 4,00,000 shares
8,40,000 X 2/12 = 1,40,000 shares
= 8,40,000 shares
(ii) Earning per share
Basic EPS 2010-11 = ` 24,00,000/24,00,000 = ` 1 Adjusted EPS 2009-10 =
` 7,20,000/24,00,000 = ` 0.30
Since the bonus issue is an issue without consideration, the issue is treated as if it had
occurred prior to the beginning of the year 2009-10, the earliest period reported.
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PAST PAPER SECTION
Question 17
The following information is available for Raja Ltd. for the accounting year 2009 – 10 and
2010 – 11.
Net Profit : Year 2009 – 10 ` 25,00,000
Year 2010 – 11 ` 49,00,000
No. of shares outstanding prior to right issue 12,00,000 shares.
Right issue : One new share for each three outstanding i.e. 4,00,000 shares
: Right issue price ` 22
: Last date of exercise rights 30-6-2010
Fair rate of one equity share immediately prior to exercise of rights on 30-6- 2010 =
` 28. (May’11)
Answer
(Hint: Theoretical Ex rights price is 26.5, Paid up shares = 332,075 Shares, Bonus Shares
= 67,925 Shares)
Question 18
Explain the concept of 'Weighted average number of equity shares outstanding during the
period.
State how would you compute, based on AS-20, the weighted average number of equity
shares in the following case:
No. of Shares 1st April, 2011 Balance of Equity Shares 4,80,000 31st August, 2011
Equity shares issued for cash 3,60,000 1st February, 2012 Equity shares bought back
1,80,000 31st March, 2012 Balance of equity shares 6,60,000 (May’12)
Answer
As per para no. 16 of AS 20, the weighted average number of equity shares outstanding
during the period reflects the fact that the amount of shareholders’ capital may have
varied during the period as a result of a larger or lesser number of shares outstanding at
any time. Therefore, For the purpose of calculating basic or diluted earnings per share,
the number of equity shares should be the weighted average number of equity shares
outstanding during the period.
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Question 19
Compute adjusted earning per share and basic earning per share based on the following
information
Net Profit 2010 – 11 ` 11,40,000
Net Profit 2011 – 12 ` 22,50,000 No. of equity shares outstanding 5,00,000 Until 31st
December, 2011
Bonus issue on 1st January, 2012, 1 equity share for each equity share
Outstanding as at 31st December, 2011 (May’12)
Answer
Period Weighted shares
1st April, 2011 to 31st August, 2011 4,80,000 shares x 5/12 2,00,000 shares
1st September, 2011 to 31st January, 8,40,000 shares x 5/12 3,50,000 shares
2012
1st February, 2012 to 31st March, 2012 6,60,000 shares x 2/12 1,10,000 shares
6,60,000 shares
Basic EPS 2010-11 = ` 11,40,000/5,00,000 shares = ` 2.28
Basic EPS 2011-12 = ` 22,50,000/10,00,000 shares = ` 2.25
Adjusted EPS 2010-11 = ` 11,40,000/10,00,000 shares = ` 1.14
Since the bonus issue is an issue without consideration, the issue is treated as if it had
occurred prior to the beginning of the year 2010-11, the earliest period reported.
Question 20
M/s. A Ltd. had 8,00,000 Equity Shares outstanding on 1st April, 2013. The Company
earned a profit of ` 20,00,000 during the year 2013-14. The average fair value per share
during 2013-14 was ` 40. The Company has given Share Option to its employees of
1,00,000 Equity Shares at option price of ` 20. Calculate Basic EPS and Diluted EPS.
(May’15)
Answer
(Hint : BEPS = 2.50, DEPS = 2.35)
Question 21
From the following information compute Basic and Diluted Earnings per Share (EPS) of
M/s. XYZ Limited for the year ended 31st March, 2017:
Net Profit for the year after tax: ` 75,00,000 Number of Equity Shares of ` 10 each
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outstanding: 10,00,000 Convertible Debentures Issued by the Company
Particulars Nos.
8% Convertible Debentures of ` 100 each 1,00,000
Equity shares to be issued on conversion 1,10,000
Rate of Income Tax: 30% (Nov’17)
Answer
(Hint : BEPS = 7.5 per share, DEPS = 7.26 per share)
Question 22
As at 1st April, 2016 a company had 6,00,000 equity shares of ` 10 each (` 5 paid up by
all shareholders). On 1st September, 2016 the remaining ` 5 was called up and paid by all
shareholders except one shareholder having 60,000 equity shares. The net profit for the
year ended 31st March, 2017 was ` 21,96,000 after considering dividend on preference
shares and dividend distribution tax on such dividend totalling to ` 3,40,000.
Compute Basic EPS for the year ended 31st March, 2017 as per Accounting Standard 20
"Earnings per Share". (May’18)
Answer
(Hint: BEPS = 4.80 per share)
Question 23
From the following information given by Sampark Ltd., Calculate Basis EPS and Diluted
EPS as per AS 20: (Nov’18)
Answer
`
Net Profit for the current year 2,50,00,000
No. of Equity Shares Outstanding 50,00,000
No. of 12% convertible debentures of ` 100 each 50,000
Each debenture is convertible into 8 Equity Shares
Interest expense for the current year 6,00,000
Tax saving relating to interest expense (30%) 1,80,000
(Hint: BEPS = 5, DEPS = 4.71 (Approx))
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Question 24
Net Profit for FY 2016-17 30,00,000
Net Profit for FY 2017-18 50,00,000
No. of shares outstanding prior to rights issue 20,00,000 shares
Rights Issue Price ` 20
Last day to exercise rights 1st June, 2017
Right issue is one new share for each five equity share outstanding (i.e. 4,00,000 new
shares)
Fair value of one equity share immediately prior to exercise of rights on 1st June, 2017
was ` 26.00.
Compute Basic Earnings Per Share for FY 2016-17, FY 2017-18 and restated EPS for FY
2016-17. (May’ 19)
Answer
Computation of Basic Earnings Per Share (as per AS 20 Earnings Per Share)
Year Year
2016-17 2017-18
` `
EPS for the year 2016-17 as originally reported
(Net Profitof the year attributable to
equity shareholders )
(Weighted average number of equity shares outstanding 1.5
during the year)
= (` 30,00,000 / 20,00,000 shares)
EPS for the year 2016-17 restated for rights issue 1.44
= [` 30,00,000 / (20,00,000 shares ×1.04* )] (approx.)
EPS for the year 2017-18 including effects of rights issue
(Rs.50,00,000)
((20,00,000 shares ×1.04×2/12)+(24,00,000 shares×10/12))
` 50,00,000/ 23,46,667 shares
2.13
Working Notes:
1. Computation of theoretical ex-rights fair value per share
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Fair value of all outstanding shares immediately prior to exercise of
rights + Total amount received from exercise
Number of shares outstanding prior to exercise + Number of
shares issued in the exercise
= (Rs 26 ×20,00,000 shares) + (Rs.20 × 4,00,000 shares)
(20,00,000 shares+4,00,000 shares)
Rs.6,00,000
= =Rs.25
24,00,000
2. Computation of adjustment factor
Fair value per share prior to exercise of rights
=
Theoretical ex - rights value per share
Rs.26
= Rs.25(Refer working note 1) =1.04 (approx.)
Question 25
Following information is supplied by K Ltd.:
Number of shares outstanding prior to right issue - 2,50,000 shares.
Right issue - two new share for each 5 outstanding shares (i.e. 1,00,000 new
shares) Right issue price - ` 98
Last date of exercising rights - 30-06-2018.
Fair value of one equity share immediately prior to exercise of right on 30
06-2018 is ` 102.
Net Profit to equity shareholders:
2017-2018 - ` 50,00,000
2018-2019 -` 75,00,000
You are required to calculate the basic earnings per share as per AS-20
Earnings per Share. (Nov’ 19)
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Answer
Fair value of shares immediately prior to exercise of rights + Total amount received
from exercise
Number of shares outstanding prior to exercise + Number of shares issued in
the exercise
102 x 2,50,000 Shares +` 98 x 1,00,000 shares
3,50,000 shares
Theoretical ex-rights fair value per share = ` 100.86
Computation of adjustment factor:
Fair value per share prior to exercise of rights = 102/100.86 = 1.01
Computation of earnings per share:
EPS for the year 2017-18 as originally reported: ` 50,00,000/2,50,000 shares = ` 20 EPS
for the year 2017-18 restated for rights issue: =` 50,00,000/ (2,50,000 shares x 1.01) =
` 19.80
EPS for the year 2018-19 including effects of rights issue:
EPS = 75,00,000/3,25,625* = ` 23.03
* [(2,50,000 x 1.01 x 3/12) + (3,50,000 x 9/12)] =63,125 + 2,62,500 = 3,25,625 shares
Note: Financial year (ended 31st March) is considered as accounting year while giving the
above answer.
Question 26
What do you mean by ‘Weighted Average number of Equity Shares outstanding during the
period’ and why is it to be calculated ?
In the following list of shares issued, for the purpose of calculation of weighted average
number of shares, from which date weight is to be considered :
(i) Equity Shares issued in exchange of cash.
(ii) Equity Shares issued as a result of conversion of a debt instrument.
(iii) Equity shares issued in lieu of interest or principal on other financial instruments.
(iv) Equity shares issued in exchange for the settlement of a liability of the enterprise.
(v) Equity Shares issued as consideration for the acquisition of an assets other than cash.
(vi) Equity Shares issued for the rendering of services to the enterprise.
(5 Marks) (Nov’ 20)
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Question 27
At the time calculating diluted earnings per share, effect is given to all dilutive potential
equity shares that are outstanding during the period”. Comment and also calculate the
basic and diluted earnings per share for the year 2020-21 from the following information:
(i) Net profit after tax for the year ` 64,12,500
(ii) No. of equity shares outstanding 15,00,000
(iii) No. of 9% convertible debentures of ` 100 issued on 1st 75,000
July,2020
(iv) Each debenture is convertible into 8 Equity Shares
(v) Tax relating to interest expenses 35%
(Dec’ 21)
Question 28
NAT, a listed entry, as on 1st April, 2021 had the following capital structure:
`
10,00,000 Equity Shares having face value of ` 1 each 10,00,000
10,00,000 8% Preference Shares having face value of ` 10 each 1,00,00,000
During the year 2021-2022, the company had profit after tax of ` 90,00,000
On 1st January, 2022, NAT made a bonus issue of one equity share for every 2 equity
shares outstanding as at 31‘' December, 2021.
On 1st January, 2022, NAT issued 2,00,000 equity shares of ` 1 each at their full market
price of ` 7.60 per share.
NAT’s shares were trading at ` 8.05 per share on 31st March, 2022.
Further it has been provided that the basic earnings per share for the year ended 31st
March, 2021 was previously reported at ` 62.30.
You are required to :
(i) Calculate the basic earnings per share to be reported in the financial statements
of NAT for the year ended 31st March, 2022 including the comparative figure, in
accordance with AS-20 Earnings Per Share.
(ii) Explain why the bonus issue of shares and the shares issue at full market price are
treated differently in the calculation of the basic earnings per share?
(May’ 22)
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REVISION QUESTIONS
Question 29
The following information is available for AB Ltd. for the accounting year 2012-13 and
2013-14:
Net profit for `
Year 2012-13 22,00,000
Year 2013-14 30,00,000
No of shares outstanding prior to right issue 10,00,000 shares.
Right issue : One new share for each five shares outstanding
i.e. 2,00,000 shares.
: Right Issue price ` 25
: Last date to exercise right 31st July, 2013
Fair value of one equity share immediately prior to exercise of rights on 31.07.2013 is
` 32.
You are required to compute:
(i) Basic earnings per share for the year 2012-13.
(ii) Restated basic earnings per share for the year 2012-13 for right issue.
(iii) Basic earnings per share for the year 2013-14.
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