Exercises on Basic EPS

1. ABC Co. had the following capital structure during 20x1 and 20x2:
Preference shares, P10 par, 6% cumulative, 50,000 shares issued and outstanding P500,000
Ordinary shares, P10 par, 200,000 shares issued and outstanding 2,000,000

ABC reported net income of P1,200,000 for the year ended December 31, 20x2. ABC paid no
preferred dividends during 20x1 and paid P15,000 preferred dividends during 20x2. In the December
31, 20x2 income statement, what amount should be reported as basic EPS?

2. DEF Co. reported net income of P1,000,000. DEF had the following equity instruments
a. 10,000, 10% cumulative preference shares issued and outstanding with par value of
P100 per share.
b. 20,000, 5% non-cumulative preference shares issued and outstanding with par value of
P20 per share
c. 11,000 ordinary shares issued and outstanding with par value of P5 per share.
DEF declared the following dividends during the year:
a. P150,000 to cumulative preference shares
b. P25,000 to non-cumulative shares
c. 27,500 to ordinary shares
Dividends in arrears on cumulative preference shares as of the beginning of the year amounted
to P200,000. Compute the basic EPS for the ordinary shares for the period.

3. During 20x1, GHI Co. had the following classes of shares issued and outstanding for the entire
year:
1,000, 12% preference shares, P100 par P100,000
100,000 ordinary shares, P12 par 1,000,000

Net income for the year was P2,500,000, inclusive of an expropriation loss of P200,000. The
income tax rate is 30%. What is the basic EPS for the year?

4. During 20x1, KVN Co. had the following two classes of shares issued and outstanding for the
entire year:
1,000, 12% redeemable preference shares, P100 par P100,000
100,000 ordinary shares, P10 par 1,000,000

During 20x1, KVN declared dividends of P60,000 and P90,000 to preference shares and ordinary
shares, respectively. KVN reported net income of P2,500,000. The income tax rate is 30%. What
is the basic EPS on ordinary shares?

5. ALY Co. had the following share capital outstanding all throughout 20x1:
10% P/S, P40 par, 50,000 issued and outstanding P2,000,000
100,000 ordinary shares, P10 par 1,000,000

The P/S are non-convertible but are cumulative and fully participating. Net profit for the year was
P1,200,000. Dividends of P800,000 were declared at the end of the year. There are no dividends in
arrears. What is the basic EPS on C/S?
6. CAR Co. had the following share capital outstanding all throughout 20x1:
Non-convertible preference shares 50,000 shares
Ordinary shares 100,000 shares
Additional information:
• Non-cumulative annual dividend on preference shares is P10 per share
• After ordinary shares have been paid a dividend of P4 per share, the preference shares
participate in any additional dividend on a 20:80 ratio with ordinary shares.
• CAR Co. reported profits of P1,230,000 for 20x1 and declared and paid the following
dividends:
Dividends on P/S P500,000
Dividends on O/S 400,000
Total 900,000

Compute the basic EPS on P/S and O/S.

7. RNL Co. had the following ordinary share transactions during the current year:
Jan 1 Ordinary shares outstanding 200,000
Feb 1 Issued a 20% bonus issue
May 1 Acquired treasury shares 12,000
June 1 Issued shares in a business combination 60,000
Aug 1 Issued shares for cash 30,000
Sept 1 Issued a 2-for-1 share split
Dec 1 Reissued treasury shares 6,000

The company reported profit of P11,429,000 during the year. What is the basic EPS?

8. Entity A had 50,000, P10 par, 6% cumulative preference share outstanding all throughout 20x1.
Entity A reported profit after tax of P1,200,000 for 20x1. The movements in the number of
ordinary shares are as follows:
Jan 1 Ordinary shares outstanding 180,000
Apr 1 Shares issued for cash 30,000
June 30 Subscribed shares 10,000
Oct 1 Reacquisition of treasury shares (20,000)

What is the basic EPS on O/S?

9. Entity B had 100,000 ordinary shares outstanding all throughout 20x1. Entity A reported profit
of P7,200,000 in 20x1 and reported basic EPS of P72. In 20x2, the following transactions
occurred:
a. On April 1, a 10% bonus issue was declared.
b. On July 1, 10,000 treasury shares were sold.
c. On September 1, a 2-for-1 share split was issued
Profit in 20x2 was P9,250,000. How should the 20x1 and 20x2 basic EPS be reported in the 20x2
financial statements?
10. Entity C has 100,000 ordinary shares outstanding on January 1, 20x1. The entity offers rights
issue to its existing shareholders that enable them to acquire an ordinary share at a subscription
price of P80 for every four rights held. The rights are exercised on April 1, 20x1. The market
price of one ordinary share immediately before the exercise is P120. The entity reported profit
after tax of P900,000 in 20x1. What is the basic EPS for 20x1?

11. Entity D had 100,000 ordinary shares outstanding throughout 20x0. On January 1, 20x1, the
entity issued 100,000 rights to acquire one ordinary share at P50 for every five rights held. The
share price of one ordinary share immediately before exercise on April 1, 20x1 is P110. The
entity reported the following profits:
Year Profit
20x0 900,000
20x1 1,000,000
20x2 1,200,000

Compute the basic EPS in 20x0, 20x1, and 20x2