Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5 rights issue on 1 October 2017 at a price of GH¢1. The market value on the last day of quotation with rights was GH¢1.60. Total earnings are GH¢50,000 in 2017, and GH¢40,000 in 2016.
Required:
Calculate the Earnings per Share for the year ended 31 December 2017 and the corresponding figure for 2016 in accordance with IAS 33: Earnings per Share. (4 marks)
View Solution
Calculation of theoretical ex-rights price:
EPS for 2016
EPS as calculated before taking into account the rights issue = 40p (GH₵40,000 divided by 100,000 shares).
(This is the corresponding value for 2016 which will be shown in the financial statements for B Co at the end of 2017)
EPS for 2017
Number of shares before the rights issue was 100,000, 20,000 shares were issued.
The figure for total earnings is the actual earnings for the year.