Question

In: Finance

1. Soundbird Ltd has 600,000 ordinary shares on issue at 1 July 2019, which is the...

1. Soundbird Ltd has 600,000 ordinary shares on issue at 1 July 2019, which is the beginning of its reporting period. On 1 January 2020, it issued a further 600,000 ordinary shares for cash. On 1 March 2020, Soundbird Ltd repurchased 10,000 shares at fair value in a market transaction.
Required: What is the correct weighted average number of shares to use in the earnings per share calculation for the year ended 30 June 2020?
Show all your workings.

2.Rosy Ltd determined its profit attributable to ordinary shareholders for the reporting period ended 30 June 2020 as $1,250,000. The number of ordinary shares on issue up to 1 October 2019 was 1,000,000. Rosy Ltd announced a one-for-two bonus issue (one bonus share for every two shares held) of shares effective for each ordinary share outstanding at this date.
Required: What is the basic earnings per share for the year ended 30 June 2020 (keep two decimal places)?
Show all your workings.

Expert Solution

1) Calculation of Weighted average No.of shares:

Shares outstanding on 1 July 2019 = 600,000

Shares issued for cash on 01 January 2020 = 600,000

Shares repurchased on 01 March 2020 = 10,000

Date (1)	No.of equity shares (2)	Period Outstanding (3)	Weights (months) (4)	Weighted average number of shares (5) (2*4)
1 July 2019	600,000	12 months	12/12	600,000
1 January 2020	600,000	6 months	6/12	300,000
1 March 2020	(10,000)	4 months	4/12	(3333)
				896,667

Weighted average No of shares = 896,667

2) Calculation of Basic earning per share for the year ended 30 June 2020:

Shares Outstanding = 1,000,000

Bonus shares issued will be one bonus share for every two shares held

1,000,000 - 2

- 1

= 1,000,000*1/2

= 5,00,000

Weighted average No.of shares Outstanding = 1,000,000*12/12+5,00,000*12/12 = 1,500,000

(Since the bonus is issued during the year it should be calculating from beginning of the year as if it is issued beginning of the year, So for bonus shares issue date is irrelevant since it is calculated from beginning of the year)

Net profits attributable to shareholders = 1,250,000

Basic Earning per share = Net profits attributable to shareholders/ weighted average No.of shares

= 1,250,000/1,500,000

= 0.83

jeff jeffy answered 1 year ago

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