Tutorial 7

Jane Lazar and Huang (4th Edition)-

Chapter 35-MFRS133
 Question 2
page 694

Given below is the extract of statement of profit or loss of Ayer Bhd, a listed
company.
Profit form the year ended 30 June x5
RM
Profit before taxation 700,000
Taxation 30% (200,000)
500,000
Dividends paid ordinary shares 100,000
- preference shares 35,000
The following information is also provided:
a. Issued share capital on 1 July x4 comprises 2 million ordinary
shares and RM500,000 7% preference shares.
b. On 1 July x4, RM500,000 10% convertible debentures (convertible
into 200 ordinary shares per RM100 debenture) were outstanding.
c. Changes in capital structure during the year ended 30 June x5 are
as follows:
a. On 1 October x4, a rights issue of ordinary shares on a one-for-four
basis at 80 sen (market price before the issue was RM1) was made.
b. The basic EPS for the year ended 30 June x4 was 18 sen.
d. Tax rate is 30%.

Required:
a. Compute the companys basic EPS for the current year and
comparative figure for the previous year.
b. Compute the diluted EPS for the current year.
 (a)

Profit = profit after preference shareholders

Basic EPS x5 500,000 35,000 = 19.4 sen

(2m x 3/12 x 1/0.96*) + (2.5m x 9/12)

= 465,000
2,395,833
Theoretical ex-right price
(2mil x RM1) + (0.5mil x RM0.80)= RM2.4mil
2.4mil / 2.5mil = 0.96
or
Number of share x Price per share (RM) = Total (RM)

4 1 4
1 0.80 0.80
5 4.8
RM4.8 5 = RM0.96
Restate EPS x4 18 sen x 0.96 = 17.3 sen
1

(b) Diluted EPS for current year

Diluted EPS presented should be the worst

possible.
 Diluted EPS x5
Profit after preference divd + interest after tax (no need to pay
since it is convert to OSC)
Number of share (current after add right issue) + new OSC
(after covert from loan/pref.share)

Diluted EPS x5 = 465,000 + (10% x 500,000 x 70%) = 14.7 sen

2,395,833 + (500,000 x 200/100)
 Question 3
page 694
Given below is the income summary for Travel Bhd for
the years ended 31 December x6 and x5:

X6 X5
RM000 RM000
Profit before taxation 500 450

Taxation (150) (140)

Ordinary dividends (50) (50)
The following information is relevant:
a. On 1 January x5, the issued share capital consisted of 2 million
ordinary shares.
b. On 1 July x5, 1 million ordinary shares were issued for a fair
consideration of RM1.5 million.
c. On 1 January x5, options were granted to employees to subscribe
for 500,000 ordinary shares in Travel Bhd for RM400,000.
d. The average market price of one ordinary share of Travel Bhd for
the year ended 31 December x5 and x6 was RM1 and RM1.20
each, respectively.
e. On 1 April x6, the company bought back 500,000 ordinary shares.
f. The net loss from discontinued operations for the year x6 was
RM100,000.
From the information given, you are required to calculated the basic
EPS and diluted EPS for years x5 and x6.
Basic EPS x5 = 450,000 140,000 ___ = 12.4 sen
(2m x 6/12) + (3m x 6/12)

Diluted EPS x5 = 450,000 140,000 ___ = 11.92 sen

2.5m + (500,000 x 0.2/1)*

*Share assume to be issued = 500,000 OSC

= 500,000 x (RM400k 500K) / RM1

=500,000 x RM0.80 /1
=400,000
Therefore, increase in shares outstanding = 500,000 400,000 = 100,000
Or
(based on working in *)
Basic EPS x6 = 500,000 - 150,000_____
(3m x 3/12) + (2.5m x 9/12)
350,000 = 13.33 sen
2.625m

Basic EPS x6 = 600,000 -150,000 ____

(Continuing (3m x 3/12) + (2.5m x 9/12)
operation)
450,000 = 17.1 sen
2.625m

Diluted EPS x6 = 500,000 150,000 ___ = 12.54 sen

2.625m + (500,000 x 0.4/1.2)

Diluted EPS x6 = 600,000 150,000 _______ = 16.12 sen

(Continuing 2.625m + (500,000 x 0.4/1.2)
operation)
 Question 7
page 697

Refer from textbook

 Basic EPS x3 10m/40m = 25 sen

Basic EPS x4 14.8m ______________ = 25.74 sen

(40m +10m* x 12/12) + ([8m +
2m**] x 9/12)

*40m x 1/4 = 10m

(bonus share need to be considering from the beginning
of the year)
**8m x 1/4 = 2m
Since bonus issue in on 1 Oct x4, new issue of 8mil also
need to take into consideration .

Restate EPS x3 25 sen x 40m/50m = 20 sen

Basic EPS x5 16.8m__________
(60m x 6/12 x 4.8/4*) + (84m** x 6/12)

= 16.8m = 21.54 sen

36m +42m

*Theoretical ex-right price

Number of share x Price per share (RM) = Total (RM)
5 4.8 24
2 2 4
7 28
RM28 7 = RM4

**Right issue (1 July) = 2/5 x 60mil = 24mil

Total share = 60mil + 24mil = 84mil
Restate Basic EPS x4 25.74 sen x 4 sen = 21.45
4.80

Diluted EPS x5 16.8m______

78m + (24m x 1.5/4.5)*

= 16.8m = 19.53 sen

86 m

*Share assume to be issued = 24,000,000 OSC

= 24,000,000 x RM3 / RM4.5

=16,000,000
Therefore, increase in shares outstanding = 24,000,000 16,000,000 = 8,000,000
Or
(based on working in *)
 Basic EPS x6 10.8m = 12.86 sen
84m

Diluted EPS x6 10.8m + 2.4m* = 11.62 sen

84m + (24m x 2/5)** + 20m***

*interest saving after tax

8% x RM40mil x 75% = 2.4mil

**Share assume to be issued = 24,000,000 OSC

= 24,000,000 x RM3 / RM5
=14,400,000
Therefore, increase in shares outstanding = 24,000,000 14,400,000 = 9,600,000
Or
(based on working in *)

***convertible loan to stock

RM40mil RM100 x 50 OSC = 20mil OSC