BKAR 3043 FINANCIAL ACCOUNTING & REPROTING IV A212

TUTORIAL 6: EPS
DUE DATE: 27 JUNE 2022

QUESTION 1

Kiramaju Berhad was incorporated in 2012 with a paid-up capital of 5,250,000 units of
ordinary shares at RM1.00 per share. On 15 January 2015, Kiramaju issued 8% convertible
bonds amounted to RM2,250,000. The bonds are convertible to 125 units of ordinary shares
for every RM250 at any time prior to their maturity date.

For the year ended 31 December 2021, the following transactions occurred:
1 January 2021 Kiramaju Berhad issued 500,000 units of 9% convertible
preference shares at RM2.00 each. The preference shares are
convertible into ordinary shares at the rate of two (2) units of
ordinary shares for each unit of preference share.
3 May 2021 Kiramaju Berhad granted an executive share option which is
eligible for senior executives to purchase 300,000 units of ordinary
shares at an exercise price of RM1.50 before 30 June 2023.
30 June 2021 45% of the 8% convertible bonds were converted to ordinary
shares.
5 September 2021 30% of the 9% convertible preference shares were converted to
ordinary shares.

Additional information:

1. The profit after tax but before preference shares dividend for the year ended 31
December 2021 was RM4,250,000.
2. The market price per ordinary share at 31 December 2021 was RM4.00 and the
average price for the financial year 2021 was RM4.50.
3. At the end of year 2021, the company declared dividends for the preference shares.
4. The income tax rate for the year was 24%.

REQUIRED:
(Round the answer to two (2) decimal points)
(a) Calculate the basic earnings per share (BEPS) for 2021 based on MFRS 133
Earnings per Share.
(b) Calculate the diluted earnings per share (DEPS) for 2021 based on MFRS 133
Earnings per Share.

1
QUESTION 2

AIRECO Bhd is a growing semi-conductor producer in Malaysia. For the last three years,
AIRECO Bhd has experienced rapid sales growth as the demand for its products expanded
nationwide. Partial Statement of Financial Position of AIRECO Bhd as at 1 January was as
follows:

2021 2020
(RM’000) (RM’000)
Share Capital
Ordinary share, 20,000,000 units issued and fully paid 100,000 100,000

Reserves
Retained Earnings 160,000 140,000
Other reserves 50,000 30,000

Long term debt

10%, Convertible loan stock A 50,000 50,000
8%, Convertible 8% loan stock B 20,000

Additional information:

1. Net income for the year ended 31 December 2020 and 2021 were RM20,000,000 and
RM25,000,000 respectively.

2. On 3 January 2021, AIRECO Bhd bought back 2,000,000 units of its own shares at the
prevailing market price of RM6.00 per share.

3. On 1 March 2021, the board of directors of AIRECO Bhd authorised the exercise of
bonus issues for all existing shares on the ratio of 1 for 1.

4. The 10% convertible loan stock A and the 8%, convertible loan stock B were issued on 1
January 2020 and 1 January 2021, respectively. Each RM1,000 of these loan stocks is
convertible into 500 ordinary shares. On 1 September 2021, twenty percent (20%) of the
10%, convertible loan stock was converted to ordinary shares.

5. AIRECO Bhd approved an employee share option scheme (ESOS) on 1 January 2019
with an exercise price of RM5 per share for all key executive directors of the company
as follows:

Name of Units at Units Units Unit Units at

directors 1 Jan 2021 granted exercised lapse 31 Dec 2021
Dato’ Asmah 400,000 0 0 0 400,000
Dato’ Ong 400,000 0 0 0 400,000
Dato’ Samuel 200,000 0 100,000 0 100,000

Only 100,000 units of the ESOS has been exercised on 1 October 2021. The average
market price of the shares for the year 2021 was RM7 while the share price on 31
December 2021 was RM7.50.

6. The corporate tax rate was constant for both years at 24%.

2
REQUIRED:

(a) Calculate comparative basic earnings per share (BEPS) for AIRECO Bhd for the
years ended 31 December 2020 and 2021.

(b) Prepare a table of earnings per incremental share (EPIS) for all potential ordinary
share (POS) for the year ended 31 December 2021.

(c) Calculate diluted earnings per share (DEPS) for AIRECO Bhd for the year ended 31
December 2021 in accordance with MFRS 133 Earnings Per Share.

(a) Assumed independently that AIRECO Bhd is in dire need to provide immediate fresh
capital for the group ongoing expansion project and offers renounceable rights issues
on the basis of ONE (1) rights issue for five existing shares with an exercise price of
RM8. AIRECO has 10,000,000 ordinary shares outstanding in 2020 and 2021. The
offer was made on 1 July 2020 and expired on 30 June 2021. The fair value of
AIRECO Bhd share on 29 June 2021 was RM10. Net income for the year ended 2020
and 2021 were RM8,000,000 and RM9,000,000 respectively. Determine the basic
earnings per share for AIRECO Bhd for the year 2020 and 2021.

QUESTION 3

SET Berhad is a leading manufacturing company in Malaysia. The Partial Statement of

Financial Position of SET Group Berhad as at 31 December 2020 was as follows:

2020

RM’000

Share Capital

12%, Cumulative convertible preference shares, 300,000,000 units 300,000

issued and fully paid

Ordinary share, 800,000,000 units issued and fully paid 800,000

Reserves

Retained earnings 590,000

Other reserves 30,000

1,720,000

Non-controlling interest 83,000

3
 Total Equities 1,803,000

Long term debt

7%, Convertible loan stock 200,000

Total Current Liabilities 80,000

Total Liabilities 280,000

Total Liabilities and Equities 2,083,000

Additional information:

1. The 7% convertible loan stock was issued on 25 April 2020. Each RM2,000 of the loan
stock is convertible into 500 ordinary shares. On 30 September 2021, FORTY
PERCENT (40%) of the 10%, convertible loan stock was converted to ordinary
shares.
2. The 12% cumulative, convertible preference shares were issued on 1 January 2019.
Each preference share is convertible into HALF (0.5) ordinary shares. On 30 August
2021, 50,000,000 units of convertible preference shares were converted into ordinary
shares.
3. The board of directors authorized a 2-for-1 reverse share split and which became
effective on 1 October 2021.
4. On 15 December 2021, the bonus issue ratio of 1 for 2 was authorized by the board of
directors for all existing shares.
5. Shares options were granted at the beginning of 2020 to purchase 40,000,000 ordinary
shares at RM10 per share. On 31 December 2021, the average market price of the
shares was RM30 per share while the share price was RM31.
6. Net income for the year ended 31 December 2021 and 2020 were RM270,000,000 and
RM105,000,000 respectively.
7. The corporate tax rate is 24%.

REQUIRED:
(Round your answers to 2 decimal points)

(a) Calculate comparative basic earnings per share (BEPS) for SET Berhad for the years
ended 31 December 2020 and 2021.

(b) Prepare a table of earnings per incremental share (EPIS) for all potential ordinary share
(POS) for the year ended 31 December 2021. Indicate whether each POS is dilutive or
anti-dilutive.

(c) Calculate diluted earnings per share (DEPS) for SET Berhad for the year ended 31
December 2021 in accordance with MFRS 133 Earnings Per Share.

4
5