BI Plc has 7 000 000 ordinary shares on issue at the beginning of the year,1 July 2014.These shares were issued at €4.50 each and have a current market value of €8.00.On 1 September 2014,BI Plc bought back 500 000 ordinary shares originally issued at €4.50 for €6.50 each.On 1 December 2014,1 000 000 shares were issued fully paid up at the current market value of these shares.Also during the period,800 000 partly paid-up ordinary shares were issued.They were issued on 1 February 2015 at an issue price of €7.20.These shares were partly paid to €4.50.The partly paid shares are permitted proportionate rights to vote and receive dividends based on the relationship between the amount paid up and the issue price. BI Plc has 1 000 000,€1.00 preference shares that provide non-cumulative dividends at a rate of 10%.The dividends were not paid this period.
For the year ended 30 June 2014,the net loss after tax was €1 000 000.
What are the basic earnings per share for BI Plc for the year ended 30 June 2015?

Question

Quizplus · Accepted Answer

The basic earnings per share is calculated by dividing the net loss by the weighted average number of ordinary shares in issue during the year. The weighted average number of ordinary shares in issue is calculated by multiplying the number of shares in issue at the beginning of the year by the proportion of the year for which they were in issue, and adding the number of shares issued during the year multiplied by the proportion of the year for which they were in issue.In this case, the number of ordinary shares in issue at the beginning of the year was 7,000,000. 500,000 shares were bought back on 1 September 2014, so the weighted average number of shares in issue for the year was 7,000,000 - (500,000 x 3/12) = 6,750,000. 1,000,000 shares were issued on 1 December 2014, so the weighted average number of shares in issue for the year was 6,750,000 + (1,000,000 x 3/12) = 7,000,000. 800,000 partly paid-up ordinary shares were issued on 1 February 2015, so the weighted average number of shares in issue for the year was 7,000,000 + (800,000 x 5/12) = 7,333,333.The net loss for the year was €1,000,000. Therefore, the basic earnings per share is €1,000,000 / 7,333,333 = €0.14.

BI Plc Has 7 000 000 Ordinary Shares on Issue