PSBA Integrated Review

Financial Accounting and Reporting – Problem Christian Aris Valix

Basic earnings per share

1. On December 31, 2021 and 2020, an entity had 200,000 ordinary shares outstanding and
10,000 cumulative preference shares outstanding. The preference dividend rate is 8% and the
preference shares have a par value of P80 per share. No dividends were declared in 2021 or
2020. The net income for the year 2021 is P1,600,000. Compute the basic EPS for the year
2021.

2. An entity provided the following share transactions for the current year:

January 1 Shares outstanding 88,000

February 1 Issued for cash 112,000
May 1 Acquired treasury shares 50,000
August 1 25% Share dividend
September 1 Reissued treasury shares 20,000
November 1 Issued 3-for-1 split
The net income for the current year is P12,000,000. Compute the weighted average ordinary
shares outstanding and the basic EPS for the current year.

3. On January 1, 2021, an entity had 300,000 ordinary shares outstanding. During 2021, the
entity issued rights to acquire one ordinary share at P10 in the ratio of one new share for
every 4 shares outstanding. The market value of the ordinary share immediately prior to the
rights issue is P35. The rights were exercised on October 1, 2021 and the net income for the
year is P8,550,000. Compute the basic EPS for the year 2021.

4. An entity had 200,000 ordinary shares outstanding on January 1, 2021. There were no
changes in the number of shares during 2021. During 2022, the following share transactions
took place:

September 1 30,000 shares were issued for cash

October 1 Distributed a 30% share dividend.

Net income for the years 2022 and 2021 were P6,825,000 and P5,980,000 respectively.
Compute the basic EPS that should be reported for 2022 in the comparative income statement
for 2022 and the basic EPS that should be reported for 2021 in the comparative income
statement for 2022.

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