Jackie Ltd has a profit after tax of $6 590 000 for the period ended 30 June 2013.In addition it has $1 000 000 of 6% cumulative preference shares.The dividends on the preference shares are not treated as expenses in the statement of comprehensive income. Jackie Ltd has 3 000 000 ordinary shares on issue at the beginning of the year 1 July 2012.On 1 November 2012,there was a 1for 6 rights issue with a subscription price of $4.00 each.The current market value of these shares is $4.50.
On 1 March 2013,200 000 partly paid-up ordinary shares were issued at an issue price of $4.50.These shares were partly paid to $2.25.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.
What is the basic EPS for Jackie Ltd for the year ending 30 June 2013 that is in accordance with AASB 133 Earnings per Share?

Question

Quizplus · Accepted Answer

To calculate the basic EPS according to AASB 133, we first need to adjust the profit for preference dividends and then divide by the weighted average number of shares.1. Adjusting profit for preference dividends:Profit after tax = $6,590,000Preference dividends = 6% of $1,000,000 = $60,000Adjusted profit = $6,590,000 - $60,000 = $6,530,0002. Calculating the weighted average number of shares:- Initial shares = 3,000,000- Rights issue: 1 for 6 rights issue means for every 6 shares, 1 new share is issued. So, 3,000,000 / 6 = 500,000 new shares from the rights issue.  The rights issue occurred on 1 November, which means these shares were in issue for 8 months (November to June).- Partly paid shares: 200,000 shares issued on 1 March, in issue for 4 months (March to June). These shares are only partly paid ($2.25 out of $4.50), so they count as 200,000 * ($2.25/$4.50) = 100,000 full shares for the purpose of EPS calculation.Weighted average number of shares = Initial shares + (New shares from rights issue * Time in issue/12) + (Partly paid shares equivalent * Time in issue/12)= 3,000,000 + (500,000 * 8/12) + (100,000 * 4/12)= 3,000,000 + 333,333 + 33,333= 3,366,666 shares3. Calculating basic EPS:Basic EPS = Adjusted profit / Weighted average number of shares= $6,530,000 / 3,366,666= $1.939, rounded to $1.93Therefore, the correct answer is B) $1.93.

Jackie Ltd Has a Profit After Tax of $6 590