Awake Plc has a net income after tax of £5 620 000 for the year ended 30 June 2016.At the beginning of the period Awake Plc has 1 000 000 fully paid-up ordinary shares on issue.On 1 February 2016,Awake Plc makes a rights issue of 1 fully paid share for every 4 shares held.The required payment for the rights issue shares was £3.00.The last cum rights price was £3.80.Awake Plc also has 2 000 000,£1.00,cumulative,7 per cent preference shares on issue for the whole period.The dividends on the preference shares are not treated as expenses in the statement of comprehensive income. What are the basic earnings per share for the period ended 30 June 2015 in accordance with IAS 33?

Question

Quizplus · Accepted Answer

The basic earnings per share is calculated by dividing the net income after tax by the weighted average number of ordinary shares in issue during the period. The weighted average number of ordinary shares in issue is calculated by taking the number of shares in issue at the beginning of the period and adding the number of shares issued during the period, multiplied by the proportion of the year that they were in issue. In this case, the number of shares in issue at the beginning of the period is 1,000,000. The number of shares issued during the period is 250,000 (1,000,000 x 1/4). The proportion of the year that the shares were in issue is 5/12 (from 1 February to 30 June). Therefore, the weighted average number of ordinary shares in issue during the period is 1,125,000 (1,000,000 + (250,000 x 5/12)). The basic earnings per share is therefore £5,620,000 / 1,125,000 = £4.39.

Awake Plc Has a Net Income After Tax of £5