IAS 33 EPS Handout PDF

FINANCIAL ACCOUNTING IIIA
MODULE EARNINGS PER SHARE
ACCOUNTING STATEMENT IAS 33
CLASS EXAMPLES AND ADDITIONAL

CONTENT
QUESTIONS
SUPPLEMENTARY CONTENT SUGGESTED SOLUTIONS
Page 1 of 79
CLASS EXAMPLE 1
The following information concerning Class Limited is presented to you:
The company was incorporated in 2010 with an issued capital of:

 100 000 12% Cumulative, non redeemable preference shares issued at R1 each
and
 75 000 Ordinary shares of no par value.
The abridged of statement of comprehensive income for the year ended 31 December
2013 and 2014 is as follows:
CLASS LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR 31 DECEMBER 2014
2014 2013
R R
Profit for the year 210 000 135 000
Other comprehensive income for the year 0 0
Total comprehensive income for the year 210 000 135 000
ADDITIONAL INFORMATION:
 Ordinary dividend of R10 000 (2013: R8 000) was declared during the current
year.
 On 1 July 2014, the company issued 20 000 ordinary shares of no par value at its
market price.
 Preference dividends were declared and paid.
 There are no components of other comprehensive income.
YOU ARE REQUIRED TO:

1. Prepare and disclose basic earnings per share and ordinary dividend per share in the relevant
extracts from the financial statements of Class Limited for the year ended 31 December 2014 in
accordance with International Financial Reporting Standards.
COMPARATIVES FIGURES ARE REQUIRED
SHOW ALL CALCULATIONS
Page 2 of 79
(a) DISCLOSURE
CLASS LIMITED
EXTRACT FROM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
2014 2013
R R
Basic earnings per share 2, 33 1, 64
CLASS LIMITED
EXTRACT FROM STATEMENT OF CHANGES IN EQUITY
Dividends per ordinary share 0, 11 0, 11
CLASS LIMITED
EXTRACT FROM NOTES TO THE FINANCIAL STATEMENTS
Earnings per share
Basic earnings per share

The calculation of basic earnings per share is based on earnings of R198 000
(2013: R123 000) and on weighted average of 85 000 (2013: 75 000) shares in issue.
Reconciliation of basic earnings

2014 2013
R R
Preference dividends (12 000)(1) (12 000)(1)
Earnings belonging to ordinary shareholders 198 000 123 000
(1) 100 000*R1*12%
(b) CALCULATIONS
Number of equity shares Actual 2014 2013
Balance 1 January 75 000 75 000 75 000
Cash issue 1/7/2014 20 000 10 000(1) 0
Balance 31 December 2014 95 000 85 000 75 000
(1) 20 000*6/12

Basic earnings per share 2014 = 198 000/85 000 = 2, 33
Dividend per share

Dividend per share 2014 = 10 000/95 000 = 0, 11
Page 3 of 79
CLASS EXAMPLE 2

and
CLASS LIMITED
2014 2013
R R
year.
 On 1 July 2014, the company issue 20 000 ordinary shares of no par value at its
market price.
 On 1 August 2014, a capitalisation issue were one ordinary share became 5
ordinary shares took place.

Page 4 of 79
(a) DISCLOSURE
CLASS LIMITED
2014 2013
R R
CLASS LIMITED
Adjusted dividends per ordinary share 0, 02 0, 02
CLASS LIMITED
Earnings per share

(2013: R123 000) and on weighted average of 425 000 (2013: 375 000) shares in issue
after the capitalisation issue on 1 August 2014. The basic earnings per share for 2013
have been adjusted accordingly.

2014 2013
R R
(1) 100 000*R1*12%
(b) CALCULATIONS
Balance 1 January 75 000 75 000 75 000
Cash issue 1/7/2014 20 000 10 000(1) 0
95 000 85 000 75 000
Capitalisation issue 1 to 5 380 000 340 000 300 000
Balance 31 December 2014 475 000(2) 425 000(2) 375 000(2)
(1) 20 000*6/12
(2) 95 000/1*5 = 475 000
85 000/1*5 = 425 000
75 000/1*5 = 375 000
Page 5 of 79
Dividend per share

Adjusted Dividend per share 2013 = 8 000/375 000 = 0, 02
CLASS EXAMPLE 3

and
CLASS LIMITED
2014 2013
R R
year.
 On 1 July 2014, the company issue 20 000 ordinary shares of no par value at its
market price.
 On 1 August 2014, a capitalisation issue were one ordinary share became 5
ordinary shares took place.
 On 1 October 2014, the directors declared a rights issue of ordinary shares of 1
new ordinary share for every five ordinary shares held on 30 September 2014 for
R2.00 per share. The fair value of the ordinary shares immediately before the
rights issue was R5.00 per share.

Page 6 of 79
(a) DISCLOSURE
CLASS LIMITED
2014 2013
R R
CLASS LIMITED
Adjusted dividends per ordinary share 0, 02 0, 02
CLASS LIMITED
Earnings per share

after the capitalisation issue on 1 August 2014 and a rights issue on 1 October 2014.
The basic earnings per share for 2013 have been adjusted accordingly.

2014 2013
R R
(1) 100 000*R1*12%
(b) CALCULATIONS
Balance 1 January 75 000 75 000 75 000
Cash issue 1/7/2014 20 000 10 000(1) 0
95 000 85 000 75 000
Capitalisation issue 1 to 5 380 000 340 000 300 000
475 000(2) 425 000(2) 375 000(2)
Rights issue - value 38 000(3) 9 500 0
513 000 434 500 375 000
Rights issue – no value 57 000(3) 48 278(4) 41 667(4)
Page 7 of 79
(1) 20 000*6/12
(2) 95 000/1*5 = 475 000
85 000/1*5 = 425 000
75 000/1*5 = 375 000
(3) 475 000/5*1 = 95 000
95 000*2/5 = 38 000 for value
95 000 – 38 000 = 57 000 no value
(4) 57 000/513 000*434 500 = 48 278
57 000/513 000*375 000 = 41 667

Dividend per share

Adjusted Dividend per share 2013 = 8 000/416 667 = 0, 02
Page 8 of 79
CLASS EXAMPLE 4

 100 000 10% Non cumulative, non redeemable participating preference shares
issued at R1 each and
CLASS LIMITED
2014 2013
R R
 Non cumulative, non redeemable participating preference shares have an
additional right of 1/4 of total dividends declared to ordinary shareholders.
year.

1. Prepare and disclose basic earnings per share, basic earnings per participating preference share,
ordinary dividend per share and dividend per participating preference share in the relevant
Page 9 of 79
(a) DISCLOSURE
CLASS LIMITED
2014 2013
R R
Basic earnings per participating preference share 0, 50 0, 35
CLASS LIMITED
Dividends per participating preference share 0, 12 0, 11
CLASS LIMITED
Earnings per share

during the year.
Basic earnings per participating preference share

(2013: R35 000) and on weighted average of 100 000 (2013: 100 000) participating
preference shares in issue.

2014 2013
R R
Earnings to be shared 200 000 125 000
Less: Earnings attributable to participating preference shares (40 000)(3) (25 000)(2)
Basic earnings belonging to ordinary shareholders 160 000(5) 100 000(4)
(1) 100 000*R1*10%
(2) R125 000*1/5
(3) R200 000*1/5
(4) R125 000*4/5
(5) R200 000*4/5
Page 10 of 79
(b) CALCULATIONS
Balance 1 January 100 000 100 000 100 000


Basic earnings per participating preference share 2014
= (10 000 + 40 000)/100 000 = 0, 50
= (10 000 + 25 000)/100 000 = 0, 35
Dividend per ordinary share

Dividend per ordinary share 2014 = 6 000/100 000 = 0, 06
Dividend per participating preference share

Dividend per participating preference share 2014
= (10 000 + 6 000*1/4) /100 000 = 0, 12
Dividend per participating preference share 2013
= (10 000 + 5 000*1/4) /100 000 = 0, 11
Page 11 of 79
CLASS EXAMPLE 5
The following information concerning Suarez Limited is presented to you:

EXTRACT FROM PRE – ADJUSTMENT TRIAL BALANCE AT 31 DECEMBER 2012
2014 2013
R R
200 000 Ordinary shares of no par value 400 000 400 000
100 000 10% Cumulative preference shares 100 000 100 000
500 000 500 000
SUAREZ LIMITED
EXTRACT FROM STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
2014 2013
R R
Profit before tax 250 000 300 000
Income tax expense (75 000) (90 000)
 On 1 March 2014, 100 000 share options were granted to employees as part of
an employee share scheme. In accordance with the option offer, employees are
entitled to take up, before 31 December 2015, two ordinary shares of R2 each at
R3 per share for every option held. All share options will be taken as per the
employee scheme rules. The average market value of one ordinary share during
the year was R5.
 The normal tax rate for both years was 30%.

1. Prepare and disclose basic earnings per share and diluted basic earnings per share in
the relevant extracts from the financial statements of Suarez Limited for the year ended
31 December 2014 in accordance with International Financial Reporting Standards.
Page 12 of 79
(a) DISCLOSURE
SUAREZ LIMITED
2014 2013
R R
Basic diluted earnings per share 0, 62 1, 00
SUAREZ LIMITED
Earnings per share

(2013: R200 000) and on weighted average of 200 000 (2013: 200 000) ordinary shares
in issue during the year.
Basic diluted earnings per share

after share options on 1 March 2014.

2014 2013
R R
(1) 100 000*R1*10%
(b) CALCULATIONS
Balance 1 January 200 000 200 000 200 000
Diluted weighted average number of shares

Share options 80 000 66 667 0
100 000*2 = 200 000*3/5 = 120 000 for value
200 000 – 120 000 = 80 000 no value
80 000*10/12 = 66 667
Page 13 of 79

Basic diluted earnings per share 2014 = 165 000/266 667 = 0, 62
Basic diluted earnings per share 2013 = 200 000/200 000 = 1, 00
QUESTION 1
The following information concerning Tap Limited is presented to you:

 125 000 12% Non cumulative, non redeemable participating preference shares
issued at R1 each and
TAP LIMITED
2014 2013
R R
 Non cumulative, non redeemable participating preference shares have an
additional right of 10% of total dividends declared to ordinary shareholders.
year.
 On 1 September 2014, a one ordinary share issued for every five ordinary shares
held capitalisation issue took place.

1. Prepare and disclose basic earnings per share, basic earnings per participating preference
share, dividend per share and dividend per participating preference share in the relevant extracts
from the financial statements of Tap Limited for the year ended 31 December 2014 in
Page 14 of 79
(a) DISCLOSURE
TAP LIMITED
2014 2013
R R
Basic earnings per share 1, 96(½P) 1, 21(½P)
Basic earnings per participating preference share 0, 26(½P) 0, 20(½P)
TAP LIMITED
Dividends per ordinary share 0, 05(½P) 0, 08(½P)
Adjusted dividends per ordinary share 0, 05(½P) 0, 06(½P)
Dividend per participating preference share 0, 12(½P) 0, 12(½P)
TAP LIMITED
Earnings per share

(2013: R109 091) (½P) and on weighted average of 90 000 shares in issue (2013:
90 000) after the capitalisation issue on 1 September 2014. (½P)The basic earnings per
share for 2013 have been adjusted accordingly. (½P)

The calculation of basic earnings per participating preference share is based on
earnings of R32 727 (2013: R25 909) (½P) and on 125 000 (2013: 125 000) participating
preference shares in issue. (½P)

2014 2013
R R
Earnings to be shared 195 000 120 000
Less: Earnings attributable to participating preference shares (17 727)(3) (10 909)(2)
Earnings belonging to ordinary shareholders 177 273(5) 109 091(4)
(1) 125 000*R1*12 %(½)
(2) R120 000*10/110(½)
(3) R195 000*10/110(½)
(4) R120 000*100/110(½)
(5) R195 000*100/110(½)
(10)
Page 15 of 79
(b) CALCULATIONS
Balance 1 January 75 000 75 000 75 000
Capitalisation issue 1/9/2014 15 000(1) 15 000(1) (½) 15 000(1) (½)
(1) 75 000/5*1

Basic earnings per share 2014 = 177 273/90 000 = 1, 96 (½P)
Basic earnings per participating preference per share

= (15 000 + 17 727)/125 000 = 0, 26 (½P)
= (15 000 + 10 909)/125 000 = 0, 20 (½P)
Dividend per share

Dividend per share 2014 = 5 000/90 000 = 0, 05 (½P)
Adjusted dividend per share 2013 = 6 000/90 000 = 0, 06
Dividend per participating preference share

Dividend per share 2014 = (15 000 + 5 000*10%)/125 000 = 0, 12 (½P)
Dividend per share 2013 = (15 000 + 6 000*10%)/125 000 = 0, 12 (½P)
(5)
Page 16 of 79
QUESTION 2
The following information concerning Brendon Limited is presented to you:

2012 2011
R R
200 0000 Ordinary shares no par value 400 000 400 000
80 000 9% Non cumulative preference shares 80 000 80 000
Ordinary dividends - 31 December (10 000) (20 000)
Preference dividends – 31 December (7 200) 0
462 800 460 000
BRENDON LIMITED
EXTRACT FROM STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
2012 2011
R R
ADDITIONAL INFORMATION
 On 1 January 2012, the directors declared a capitalisation issue of three new

ordinary shares for every ten ordinary shares already held.
 On 30 June 2012, the directors declared a rights issue of ordinary shares of three
new ordinary shares for every five ordinary shares held on 30 June 2012 for
R2.00 per share. The fair value of the ordinary shares immediately before the
rights issue was R5.00 per share.
 On 31 August 2012, the directors issued 30 000 ordinary shares at R2 to finance
future expansion.

1. Prepare and disclose basic earnings per share and ordinary dividend per share in the
relevant extracts from the financial statements of Brendon Limited for the year ended
NB: COMPARATIVES FIGURES ARE REQUIRED
Page 17 of 79
(a) DISCLOSURE
BRENDON LIMITED
2012 2011
R R
BRENDON LIMITED
BRENDON LIMITED
Earnings per share
335 484) (½P) after the capitalisation issue on 1 January 2012 and rights issue on 30
June 2012. The basic earnings per share for 2011 have been adjusted accordingly. (½P)
2012 2011
R R
Preference dividends (7 200)(1)(½) 0(½)
Basic earnings 178 300 200 900
(1) 80 000 x 9%
(5.5)
(b) CALCULATIONS
Balance 1 January 200 000 200 000 200 000
Capitalisation issue - no value 1/1/2012 60 000(1) 60 000(1) (½) 60 000(1) (½)
260 000 260 000 260 000
Rights issue – Issue for value 30/6/2012 62 400(2) 31 200(3) (½) 0
322 400 291 200 260 000
Rights issue – Issue for no value 30/6/2012 93 600(2) 84 542(4) (½) 75 484(5) (½)
416 000 375 742 335 484
Share issue for value 31/8/2012 30 000 10 000(6) (½) 0
Page 18 of 79
(1) 200 000/10 x 3 (½)
(2) 260 000/5x3 = 156 000 x R2 = R312 000 cash received on share issue (½P)
R312 000/5 = 62 400 issue for value (½)
156 000-62 400=93 600 issue for no value (½)
(3) 62 400 x 6/12 (½)
(4) 93 600/322 400 x 291 200 (½)
(5) 93 600/322 400 x 260 000 (½)
(6) 30 000 x4/12 (½)

Dividend per share

Adjusted dividend per share 2011 =20 000/335 484 = 0, 06(½P)
(9.5)
Page 19 of 79
QUESTION 3
The following information concerning Shop Limited is presented to you:

2012 2011
R R
250 000 8% Convertible preference shares 250 000 250 000
350 000 350 000
The abridged statement of comprehensive income for the year ended 31 December
SHOP LIMITED
2012 2011
R R
 No ordinary dividends were declared for the past three years.
 On 1 February 2012 a one ordinary share for five ordinary shares held
capitalisation issue took place.
 All the 8% convertible preference shares were issued on 1 January 2009 and
were convertible into ordinary shares at the option of the convertible preference
shareholders. 60% of the preference shares were converted into ordinary shares
on 1 April 2012, in the ratio of two ordinary shares for every five convertible
preference shares held. The remaining preference shares were only to be
converted into ordinary shares during the 2013 financial year, under the same
conditions. If not converted into ordinary shares they will be redeemed at the end
of 2013 financial year.

the relevant extracts from the financial statements of Shop Limited for the year ended
(15 Marks)

Page 20 of 79
(a) DISCLOSURE
SHOP LIMITED
2012 2011
R R
Diluted basic earnings per share 1, 03(½P) 0, 82(½P)
(2)
SHOP LIMITED
Earnings per share
(2011: R260 000) (½P) and on weighted average of 285 000 (2011: 240 000) (½P)
shares after the capitalisation issue on 1 February 2012. The basic earnings per share
for 2011 have been adjusted accordingly. √P
Diluted basic earnings per share
The calculation of diluted basic earnings per share is based on earnings of R350 000
(2011: R280 000) (½P) and on weighted average of 340 000 (2011: 340 000) shares
(½P) after the capitalisation issue on 1 February 2012. The diluted basic earnings per
share for 2011 have been adjusted accordingly. √P
Reconciliation of basic earnings to diluted earnings

2012 2011
R R
Preference dividends (11 000)(2)(½P) (20 000)(1)(½P)
Preference dividends 11 000(½P) 20 000(½P)
Diluted basic earnings 350 000 280 000
(1) R250 000 x 8%
(2) 250 000 x 60% x 8% x3/12 + 250 000 x 8% x 40%
(6)
Page 21 of 79
(b) CALCULATIONS
Balance 1 January 200 000 200 000 200 000
Capitalisation issue - 1/2/2012 40 000(1)(½P) 40 000(1)(½P) 40 000(1)(½P)
240 000 240 000 240 000
Conversion of preference shares 60 000(2)(½P) 45 000(3)(½P) 0
(1) 200 000/5 x 1 (½)
(2) 250 000 x 60% = 150 000/5 x 2(½)
(3) 60 000 x 9/12 (½)

Basic earnings per share 2012 =339 000/285 000 = 1, 19 (½)
Basic earnings per share 2011 =260 000/240 000 = 1, 08 (½)
Number of dilutive shares Actual 2012 2011

Convertible preference shares – converted 0 15 000(1) 60 000
Convertible preference shares 40 000(2) 40 000 40 000
340 000 340 000 340 000
(1) 60 000 x 3/12 (½)
(2) 250 000 x 40%/5 x 2 (½)
Dilutive instruments
Convertible preference shares

Diluted basic earnings per share 2012 = 350 000 / 340 000 = 1, 03 (½)
Diluted basic earnings per share 2011 = 280 000 / 340 000 = 0, 82 (½)
Shares conversion = 250 000/5 x 2 shares = 100 000 ordinary shares

(7)
Page 22 of 79
QUESTION 4
The following information concerning Zebra Limited is presented to you:

2012 2011
R R
200 000 Ordinary shares issued 80 000 80 000
132 500 132 500
The abridged statement of comprehensive income and statement of change in equity for
the years ended 31 December 2011 and 2012 are as follows:
ZEBRA LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
R R
Profit /(loss) for the year 630 000 (100 000)
Total comprehensive income /(loss) for the year 630 000 (100 000)
ZEBRA LIMITED
EXTRACT FROM STATEMENT OF CHANGE IN EQUITY
RETAINED
EARNINGS
2012 2011
R R
Opening balance 300 000 200 000
Capitalisation issue of ordinary shares (16 000) 0
Ordinary dividends (25 000) (20 000)
8% Preference dividend (4 200) 0
Closing balance 884 800 80 000
 Profit before tax includes impairment of goodwill of R10 000 (2011: 0) and the
profit on sale of land of R15 000 (2011: R20 000). South African Revenue
Services will not allow the impairment of goodwill to be deductible against future
profits and the profit on sale is fully taxable.
 A capitalization issue took place according to which two ordinary shares were
awarded for every ten ordinary shares held on 1 March 2012.
 On 1 July 2012, ordinary shares were issued in terms of a rights issue in the ratio
of 2 ordinary shares for every 5 ordinary shares held on this date, at R4 a share.
The fair value before the rights issue was R9 per ordinary share.
 The tax rate for all years under review was 30%.
Page 23 of 79
1. Prepare and disclose basic earnings per share, ordinary dividend per share and
headline basic earnings per share in the relevant extracts from the financial
statements of Zebra Limited for the year ended 31 December 2012 in accordance
with International Financial Reporting Standards and JSE listing requirements.
(a) DISCLOSURE
ZEBRA LIMITED
2012 2011
R R
Basic earnings/ (loss) per share 2, 01(½P) (0, 37) (½P)
Headline basic earnings/ (loss) per share 2, 01(½P) (0, 41) (½P)
ZEBRA LIMITED
(4)
ZEBRA LIMITED
Earnings per share

The calculation of basic earnings per share is based on earnings/ (loss) of R625 800
(2011: loss of R104 200) (½P) and on weighted average of 310 642 (2011: 285 283)
shares (½P) after the rights issue on 1 July 2012 and capitalisation issue on 1 March
2012. The basic earnings per share for 2011 have been adjusted accordingly (½P)
Headline basic earnings per share

The calculation of headline basic earnings per share is based on earnings/ (loss) of
R625 300 (2011: loss of R118 200) (½P) and on weighted average of 310 642 (2011:
285 283) shares (½P) after the rights issue on 1 August 2012 and capitalisation issue on
2 March 2012. The headline basic earnings per share for 2011 have been adjusted
accordingly. (½P)
Page 24 of 79
Reconciliation of basic earnings to headline basic earnings
2012 2011
R R
Preference dividends (4 200)(1) (½) (4 200)(1) (½)
Basic earnings 625 800 (104 200)
Impairment of goodwill 10 000(½) 0
Profit on sale of land (10 500)(2) (½) (14 000)(3) (½)
Headline basic earnings 625 300 (118 200)
(1) R52 500 x 8%

(2) R15 000 x 70% (½)
(3) R20 000 x 70% (½)
(6.5)
(b) CALCULATIONS
Balance 1 January 200 000(1) 200 000 200 000
Capitalisation issue 1/3/2012 40 000(2) 40 000(2) (½) 40 000(2) (½)
240 000 240 000 240 000
Rights issue – for value 1/7/2012 42 667(3) 21 334(4) (½) 0
282 667 261 334 240 000
Rights issue – no value 1/7/2012 53 333(3) 49 308(5) (½) 45 283(6) (½)
(1) 80 000/0.40
(2) 200 000/10 x 2
(3) 240 000/5 x 2 = 96 000 shares
96 000 x R4/R9 = 42 667 issue for value
96 000 – 42 667 = 53 333 no value
(4) 42 667 x 6/12
(5) 53 333/282 667 x 261 334
(6) 53 333/282 667 x 240 000

Basic earnings per share 2012 = 625 800/310 642 = 2, 01 (½)
Basic earnings per share 2011 = (104 200)/285 283 = (0, 37) (½)

Headline basic earnings per share 2012 = 625 300/310 642 = 2, 01(½)
Headline basic earnings per share 2011 = (118 200)/285 283 = (0, 41) (½)

Adjusted dividend per ordinary share 2011 = 20 000/285 283 = 0, 07
(4.5)
Page 25 of 79
QUESTION 5
The following information concerning Khan Limited is presented to you:

KHAN LIMITED
2014 2013
R R
Profit for the year ?? ??
Total comprehensive income for the year ?? ??
Basic diluted earnings per share 0, 95 0, 90
KHAN LIMITED
Weighted average number of shares:

Balance 1 January 140 000 120 000 100 000
Rights issue – for value 31/6/2014 0 0 0
140 000 120 000 100 000
Rights issue – no value 31/6/2014 0 0 0
140 000 120 000 100 000
Capitalisation issue – no value 2 for 10 20 000 20 000 20 000
 Khan Limited was incorporated in 1 January 2011 and immediately issued
100 000 ordinary shares to its shareholders.
 On 1 January 2011, the company further issued 100 000 10% cumulative,
non redeemable preference shares at R3 each share. No other preference
shares were issued after this issue.
 It has been established that the bookkeeper incorrectly calculated the actual and
weighted average number of shares. This has resulted in an incorrect calculation
of basic earnings per share, dividends per share and diluted basic earnings per
share. Basic earnings to ordinary shareholders were correctly calculated.
 The company declared ordinary dividends every year since incorporation.
 There was a rights issue on 30 June 2014, offering 2 ordinary shares for every
10 ordinary shares held on this date at an ordinary share issue price of R5 when
the market price was R10 per ordinary share. All shares were taken up.
 There was a capitalisation issue on 30 November 2013 of 2 ordinary shares for
every 10 ordinary shares held.
 There are 20 000 share options in existence, each of which allows the holder of 1
share option to acquire 4 ordinary shares at a strike price of R5 per share. The
average market price per ordinary share is R7. The share options have already
vested but not expired. These share options have been in issue for 4 years.
Page 26 of 79

1. Prepare and disclose basic earnings per share, basic diluted earnings per share and
ordinary dividend per share in the relevant extracts from the financial statements of
Khan Limited for the years ended 31 December 2014 in accordance with
International Financial Reporting Standards. (15 Marks)
(a) DISCLOSURE
KHAN LIMITED
2014 2013
R R
Basic diluted earnings per share 0, 95(½P) 0, 90(½P)
KHAN LIMITED
Adjusted dividends per ordinary share 0, 13 0, 14(½P)
KHAN LIMITED
Earnings per share

The calculation of basic earnings per share is based on earnings of R133 000 (2013:
R108 000) (½P) and on weighted average of 137 455 (2013: 130 909) shares (½P) after
the rights issue on 30 June 2014 and capitalisation issue on 30 November 2013. The
basic earnings per share for 2013 have been adjusted accordingly (½P)

The calculation of basic diluted earnings per share is based on earnings of R133 000
(2013: R108 000) (½P) and on weighted average of 160 312 (2013: 153 766) shares
after the rights issue on 30 June 2014 and capitalisation issue on 30 November 2013.
(½P)The basic diluted earnings per share for 2013 have been adjusted accordingly (½P)
Page 27 of 79
2014 2013
R R
(1) 100 000*R3*10% (½)
(b) CALCULATIONS
Balance 1 January 100 000
Capitalisation issue – no value 2 for 10 0 0 20 000
120 000 120 000 120 000
Rights issue – for value 31/6/2014 12 000(1) 6 000(2) 0
132 000 126 000 120 000
Rights issue – for no value 31/6/2014 12 000(1) 11 455(3) 10 909(4)
(1) 120 000/10held*2shares = 24 000 shares
24 000*R5/R10 = 12 000 issue for value
24 000 – 12 000 = 12 000 issue no value (½)
(2) 12 000*6/12(½)
(3) 12 000/132 000*126 000(½)
(4) 12 000/132 000*120 000(½)

Share options 80 000(1) 22 857(2) 22 857(2)
224 000 160 312 153 766
(1) 20 000/1*4
(2) 80 000*R5/R7 = 57 143 shares for value (½)
80 000 – 57 143 = 22 857 shares for no value (½)



Dividend per ordinary share 2014 = 19 200/144 000 = 0, 13 (½)
Dividend per ordinary share 2013 = 18 000/120 000 = 0, 15 (½)
Adjusted dividend per ordinary share 2013 = 18 000/130 909 = 0, 14
Basic earnings 2014 = 0, 95*140 000 shares = R133 000(½)

Basing earnings 2013 = 0, 90*120 000 shares = R108 000(½)
Ordinary dividends declared 2014 = 160 000 shares*0, 12 = R19 200(½)

Ordinary dividends declared 2013 = 120 000 shares*0, 15 = R18 000(½)
Page 28 of 79
QUESTION 6
The following information concerning Scope Limited is presented to you:

2014 2013
R R
Ordinary dividends 0 0
700 000 700 000
SCOPE LIMITED
2014 2013
R R
 On 1 August 2014, there was a share split where every 2 ordinary shares held
became 1 ordinary share.
 On 1 March 2014, 100 000 share options were granted to employees as part of
an employee share scheme. In accordance with the option offer, employees are
entitled to take up, before 31 December 2015, two ordinary shares of R1 each at
R1, 50 per share for every option held. All share options will be taken as per the
employee scheme rules. The average market value of one ordinary share during
the year was R2, 50.

1. Prepare and disclose basic earnings per share and diluted basic earnings per share in the
relevant extracts from the financial statements of Scope Limited for the year ended
Page 29 of 79
(a) DISCLOSURE
SCOPE LIMITED
2014 2013
R R
Basic earnings per share 1, 32(√P) 1, 60(√P)
Diluted basic earnings per share 1, 04(√P) 0, 00
SCOPE LIMITED
Earnings per share

(2013: R400 000) (√P) and on weighted average of 250 000 shares in issue
(2013: 250 000) (√P) after the share consolidation on 1 August 2014. The basic earnings
per share for 2013 have been adjusted accordingly.

(2013: R0) (√P) and on weighted average of 316 667 shares in issue (2013: 0) after the
share options on 1 March 2014. The diluted basic earnings per share for 2013 have
been adjusted accordingly.

2014 2013
R R
(1) R200 000*10 %(√)
(b) CALCULATIONS
Balance 1 January 500 000 500 000 500 000
Share split – no value 1/8/2014 (250 000) (250 000)(2) (250 000)(2)
Balance 31 December 2014 250 000(1) 250 000 250 000
(1) 500 000/2*1 = 250 000(√)
(2) (250 000)/500 000*500 000(√)
Page 30 of 79
Basic earnings per share 2014 = 330 000/250 000 = 1, 32 (√P)
Basic earnings per share 2013 = 400 000/250 000 = 1, 60 (√P)
Number of dilutive shares Actual 2014

Balance 31 December 2014 250 000 250 000
Share options – no value 80 000(1) 66 667(2)
1/3/2014
(1) 100 000*2 = 200 000*R1.50 = R300 000/R2.50 = 120 000(√)
200 000 - 120 000 = 80 000 no value shares (√)
(2) 80 000*10/12(√)

Diluted earnings per share 2014 = 330 000/316 667 = 1, 04 (√P)
(15)
QUESTION 7
Duck & Dive Ltd earned a profit of R 840 000 for the year ended 31 December 2004
and a profit of R 740 000 for the year ended 31 December 2003.
In addition to 10 million R1-00 ordinary shares Duck & Dive also has 500
000 R10 participating preference shares, which are subject to the following
conditions:
- A fixed 12% dividend; and
- An additional right of 12, 5% of total dividends declared to
ordinary shareholders On 1 September 2004 a one for four
capitalisation issue took place.

1. Disclose the earnings per share and in the notes to the financial statements for the year
ended 31 December 2004 to comply with the requirements of Generally Accepted
Accounting Practice.
Page 31 of 79
2004 2003
R R
1. Earnings:
Profit for the period : 840,000 740,000
Less : Fixed preference dividend - R 5 000 000*12% (600,000) (600,000)
Variable preference share of profit – 240,000 140,000
R 240 000x12,5/112,5 (26,667) (15,556)
Profit attributable to ordinary shareholders: 213,333 124,444
2. Weighted average number of shares:

2004 2003
Actual Weighted
In issue on 1 January 2004 (1) 10,000,000 10,000,000
10,000,000 10,000,000
Capitalisation issue :
One for four caps issue :1/9/2004
(2) 2,500,000 2,500,000
12,500,000 12,500,000
3 Earnings per share : R R
2004 2003
Earnings : 213,333 124,444
Weighted average no of shares : 12,500,000 12,500,000
Earnings per share : (2) 0.02 0.01
Earnings per participating preference
share:
Earnings : 626,667 615,556

No of shares 500,000 500,000
Earnings per participating preference 1.25 1. 23
share:
Duck & Dive Ltd

Notes to the financial statements for the year ended 31 December 2004
1, Earnings per share

The calculation of earnings per ordinary share is based on earnings of
R 213 333 - (2003 -R 124 444) and on the weighted average of 12 500
000 ordinary issued shares - (2003 -12 500 000), after a capitalisation
issue on 1 September 2004. The earnings per share for 2003 were
adjusted accordingly.
Earnings per participating preference share
The earnings per participating preference share is based on earnings of
R 626 667 – (2003 - R 615 556) and on 500 000 preference shares in
issue - (2003 - 500 000). (2)
Page 32 of 79
QUESTION 8
The following information was extracted from the annual financial statements of Starship
Limited for the year ended 31 December 2002. Starship Limited commenced business
on 1 January 2001:
1. SHARE CAPITAL
2002 2001
Authorized
10 000 000 Ordinary shares of R1 each R10 000 000 R10 000 000
200 000 12 % Redeemable cumulative
preference shares of R100 each R20 000 000 R20 000 000
Issued and fully paid on 1 January 2001
1 000 000 Ordinary shares of R1 each R1 000 000 R1 000 000

50 000 12 % Redeemable cumulative
preference shares of R100 each R5 000 000 R5 000 000
R6 000 000 R6 000 000
The 12 % redeemable cumulative preference shares are redeemable at the discretion of

the company after 1 January 2005 at R120 per share.
A dividend in respect of the 12 % redeemable cumulative preference shares was paid on

31 July 2002. The arrear dividends amount to RNil (2001: R600 000).
2. LONG-TERM LIABILITIES
2002 2001
15 % R100 convertible debentures R10 000 000 R10 000 000
The debentures may be converted at the

discretion of the debenture holder on 31
December 2009 into twelve ordinary shares
for every debenture held.
3. DEFERRED TAXATION
2002 2001
Credit balance R800 000 R300 000
4. OTHER INFORMATION EXTRACTED FROM THE STATEMENT OF PROFIT OR

LOSS AND OTHER COMPREHENSIVE INCOME
2002 2001
Profit before taxation R3 400 000 R2 000 000
Dividends paid - Preference shares R1 200 000 -
- Ordinary shares R200 000 R100 000
Page 33 of 79
Additional information
1. The rate of taxation is 50 % for 2001 and 48 % for 2002.

2. The company provides for deferred taxation on the comprehensive basis and
there are no permanent differences.

1. Calculate the earnings per share and dividends per share for the year ended 2002.
2. Show how earnings per share and dividends per share should be disclosed in the annual
financial statements of Starship Limited for the year ended 31 December 2002 to
comply with Generally Accepted Accounting Practice.
3. Calculate the fully diluted earnings per share for 2002 if the debentures are convertible on
31 December 2003.
Calculations:
1. Earnings per share

2002 2001
R R
Profit before taxation 3 400 000 2 000 000
Taxation
- current and deferred (1 632 000) (1 000 000)
- rate change 12 000 -
1 780 000 1 000 000
Cumulative preference dividend (600 000 (600 000)
1 180 000 400 000
Ordinary shares issued 1 000 000 1 000 000
Earnings per share 1,18 0,40
2. Ordinary dividend per share

2002 2002
Dividend paid R200 000 R100 000
Ordinary shares issued 1 000 000 1 000 000
Dividend per share (cent) 0,20 0,10
Page 34 of 79
Disclosure
STARSHIP LIMITED
2002 2001
Earnings per share 1,18 0,40

Dividend per share 0,20 0,10
Notes to the financial statements for the year ending 31 December 2002
Earnings per share
The calculation of earnings per share was based on an earnings of R1 180 000 (2001: R400
000) and a weighted average number of issued shares for the year of 1 000 000 (2001: 1 000
000).
3. CALCULATION OF FULLY DILUTED EARNINGS PER SHARE

Profit before taxation R3 400 000
Interest on 15 % convertible debentures R1 500 000
R4 900 000
Taxation: Current and deferred (R2 352 000)
Rate change R12 000
R2 560 000
Cumulative preference shares (R600 000)
R1 960 000
Number
Issued ordinary shares 1 000 000
Debentures converted (10 000 000/ 100 x 12) 1 200 000
2 200 000
Fully diluted earnings per share (cent) 0,89
Page 35 of 79
QUESTION 9
BLOU BREWERY LIMITED
Blou Brewery Limited has been listed on the JSE since 1994.
1. Profit on ordinary activities after taxation amounted to R580 000 for 1997 (1996 -
R420 000).
2. The following dividends were declared: 1997 1996
Ordinary shares 80 000 70 000
Preference shares 30 000 20 000
3. Included in profit before taxation are the following:
1997 - Capital profit on the sale of land R80 000
1996 - Goodwill written off R45 000
4. The authorised ordinary share capital consist of 2 500 000 ordinary shares of R1
each. At incorporation in 1990, 1 600 000 ordinary shares were issued. On 30
Augustus 1997 Blou Breweries Ltd issued another 900 000 ordinary shares at
R2, 00 per share.
YOU ARE EQUIRED TO:
1.1 Calculate the earnings and headline earnings per share and show how it will be
disclosed in the financial statements and notes of Blou Breweries Ltd for the year
ended 31 December 1997. Your answer should comply with GAAP. Calculate the
earnings and headline earnings per share to the first decimal.
1.2 Calculate the earnings per ordinary share and earnings per preference shares for
the year ended 31 December 1997 from the same information as above applied
including the following addition information:
 The company had 300 000 10% participating preference shares of R1 each
 The participating preference shareholders are entitled to 10% of the
dividends paid to ordinary shareholders over and above the fixed dividend.
Page 36 of 79
1.1
BLOU BREWERIES LIMITED
Notes 1997 1996
Earnings per share 1. 28, 9 c 25, 0 c

Headline earnings per share 24, 7 c 27, 8 c
Dividend per share 3.2c 4.4c
(3)
Notes to the financial statements
1. Earnings per share.
The calculation of earnings per share is based on earnings of R550 000
(1996 - R400 000) and 1 900 000 weighted average number of shares
(1996 - 1 600 000). (1)
The calculation of headline earnings per share is based on earnings of R470 000
(1996 - R445 000) and 1 900 000 weighted average number of shares
(1996 - 1 600 000). (1)
Reconciliation between earnings and headline earnings

1997 1996
Profit on ordinary activities per fin stem 580,000 420,000
Preference dividends (30,000) (20,000)
(2)
Earnings 550,000 400,000
Adjustments
- Capital profit on the sale of land (80,000) (1)
- Goodwill written off 45,000(1)
Headline earnings 470,000 445,000
Total adjustment (4, 2 c) 2, 8 c
1997 1996
WANS actual weighted weighted
Initial issue 1,600,000 1,600,000 1,600,000
Ordinary shares issue 900,000 300,000 (2)
2,500,000 1,900,000 1,600,000
1.2
Calculation of earnings
1997 1996
R R
Earnings as calculated above 550 000 400 000
Participating preference shareholders part
550 000 x 10/110 (50 000) 1
400 000 x 10/110 (36 364) 1
Earnings for ordinary shareholders 500 000 363 636
Earnings per ordinary share

500 000/1 900 000 26.32c 1
363 636/1 600 000 22.73c 1
Earnings per participating preference share
(50 000 + 30 000)/300 000 26.67c 1
(36 364 +20 000)/300 000 18.79c 1
Page 37 of 79
QUESTION 10
The issued share capital of Lobatse Ltd on 1 January 1997 and 1996 is as follows:
Share capital
1997 1996
R R
500 000 Ordinary shares of R1 each 500 000 500 000
100 000 10 % Cumulative participating preference shares 200 000 200 000
700 000 700 000
Relevant information taken from the income statement for the years ending 31
December 1997 and 31 December 1996 follows:
1997 1996
R R
Operating income 800 000 600 000
Taxation (320 000) (240 000)
Net profit after extraordinary item 480 000 410 000
Preference dividend (20 000) (20 000)
Normal dividend (100 000) (80 000)
Retained income for the year 360 000 310 000
Participating preference shares are entitled to an amount of 10% of the profits

attributable to ordinary shareholders over and above their fixed preference dividend.
On 1 December 1997 a capitalisation issue of one share for every five shares took
place.
Disclose the earning and dividend per share information in the financial statements and
notes of Lobatse Ltd for the year ended 31 December 1997. Comply with general
accepted accounting practice. Show all calculations.
Page 38 of 79
Calculations
Total 1997 1996

Total number of shares 500 000 500 000 500 000
Capitalisation issue (1 for 5) 100 000 100 000 100 000 1
600 000 600 000 600 000
Participating reference shares 100 000 100 000 100 000
Earnings of equity shares

Operating income 480 000 410 000
Preference dividend (20 000) (20 000) 1
460 000 390 000
Distribution of earnings
Ordinary shareholders 100/110 418 182 354 545 1
Participating preference shareholders 10/110 41 818 35 455 1
460 000 390 000
Earnings per share

Ordinary shares 418 182/600 000 69.7 1
354 545/600 000 59.1 1
Participating preference shares 61 818/ 100 000 61.8 1
55 455/ 100 000 55.5 1
Dividend per share

Ordinary dividend 100 000/600 000 16.6 1
80 000/500 000 16.0 1
Adjusted dividend 80 000/600 000 13.3 0.5
Preference dividend per share 20 000/ 100 000 20 1
20 000/ 100 000 20 1

Retained income end of year XXX XXX

1
Earnings per ordinary share 69.7 59.1
Dividend per ordinary share 16.6 16.0 1
Adjusted ordinary dividend per share 13.3 0.5
Earning per participating preference share 61.8 55.5 1
Dividend per participating preference share 20 20 0.5
Page 39 of 79
Notes to the financial statements of Lobatse Ltd for the year ending 31 December 1997
Earnings and dividend per share

Earnings per ordinary share was calculated by using earnings attributable to normal shareholders
of 418182 (354545 - 1996) and a weighted average number of 600 000 shares after taking the
capitalisation issue of 100 000 shares into consideration.
(2)
Adjusted dividend per share for 1996 was calculated on the normal dividend of 80 000 and the
adjusted number of ordinary shares of 600 000. (0.5)
The earnings per particpating preference shareholders was calculated by using an earnings
attributable participating preference shareholders of 61818 (55455 - 1996) and 100 000 shares.
(1)
Page 40 of 79
QUESTION 11
The capital structure of Omang–Kemang Limited on 31 December 2005 consisted of the

following: R75 000 15% Cumulative preference shares of R1 each.
R4 000 000 Ordinary shares of 50c each.
Additional information:
No shares were issued during 2004.
The abridged STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
of the company for the year ended 31 December 2005 reflected the following:
2005 2004
R R
Profit for the period 300 000 280 000
The following dividends were paid by Omang–Kemang Limited for the year ended 31
December 2004 and 2005:
2005 2004
R R
Preference dividends 11 250 -
Ordinary dividends 40 000 -
On 1 April 2005, 2 500 000 share options were granted to employees ranked lower than
the level of director. In accordance with the option offer, employees are entitled to take
up, before 31 December 2010, four shares of 50c each at R1 per share for every option
held. The trade union which negotiates on behalf of the employees is liable to take up all
share options which are not taken up by employees. The average fair value of one
ordinary during the year was R1.35.
Calculate and disclose the earnings, diluted earnings and dividend per share of Omang-
Kemang Limited for the year ended 31 December 2005. Your answer must comply with
Statements of Generally Accepted Accounting Practice.
Comparative figures are required.
Page 41 of 79
Calculations:
1. Earnings
2005 2004
R R
Preference dividend (11 250)(1) (11 250)(1)
Earnings 288 750 268 750
2. Weighted average number of shares

2005 2004
R R
Number of shares issued 8 000 000 8 000 000(1)
3. Weighted average number of diluted shares

Total 2005 2004
R R R
Number of shares issued 8 000 000 8 000 000
Number issued on exercising options 1 944 444 -
2 500 000x4x1/1.35=7 407 407 (1)
10 000 000 - 7 407 407=2 592 593 (½)
2 592 593x9/12=1 944 444 (½)
9 944 444 8 000 000
(5)
Note for diluted shares’ number of shares

Only the bonus element (10 000 000 – 7 407 407) part of the potential ordinary shares is taken
into account for the calculation of the diluted earnings per share. The issue for value (7 407 407)
is not deemed to have a dilutive effect, as new shares will have the same potential earnings as
the shares currently in issue.
2005 2004
R R
Earnings per share 288 750/(½) 268 750/(½)
8 000 000(½) 8 000 000(½)
= 0.036 = 0.034
Dividend per share 40 000/(½) -
8 000 000(½)
=0.005
Diluted earnings per share 288 750/(½) -
9 944 444(½)
=0.029
(4)
Page 42 of 79
Disclosure
OMANG-KEMANG LTD
2005 2004
R R
(1P)
Earnings per share 0.036 0.034
Dividend per share 0.005 -
Diluted earnings per share 0.029 -
(1)
QUESTION 12
The capital structure of Jenno Ltd on 1 January 2004 was as follows:
400 000 ordinary shares of R2 each R800 000

500 000 15.5% participating preference shares of 50 cents each R250 000
The participating preference shares have the right to participate in the distribution of
earnings of 20 cents for every R1 given to ordinary shareholders.
On 30 June 2005, the directors declared a rights issue of ordinary shares of one new
ordinary share for every ten ordinary shares held on 30 June 2005 for R3.00 per share.
The fair value of the ordinary shares immediately before the rights issue was R4.00 per
share.
On 31 August 2005, the directors declared a capitalisation issue of two new ordinary
shares for every 15 ordinary shares already held.
On 30 November 2005, the directors issued 60 000 ordinary shares to acquire

immediate and effective control in a subsidiary.
The profit for the year for Jenno Limited was as follows:
2005 R670 000
2004 R560 000
The directors of the company declared dividends of R250 000 on 31 December 2005 for
the year ended 31 December 2005 and dividends of R200 000 on 31 December 2004 for
the year ended 31 December 2004.
Disclose the earnings per ordinary share, earnings per participating preference share
and dividend per ordinary share in the financial statements of Jenno Limited for the year
ended 31 December 2005 in compliance with the Statements of Generally Accepted
Accounting Practice.
JENNO LTD
Page 43 of 79
2005 2004
Profit for the period 670 000 (1) 560 000 (1)
Earnings per ordinary share 55 cents (½P) 47 cents

Earnings per participating preference share 29 cents (½P) 25 cents
Dividend per share 26 cents (½P) 25 cents
(3½)
Calculations
1. Earnings 2005 2004

Less fixed portion of pref. div. (15, 5 % x R250 000) (38 750) (1) (38 750) (1)
631 250 521 250
Less part. Portion preference dividend
631 250 x 20/120 (105 208) (1)
521 250 x 20/120 (1) (86 875) (1)
Earnings attributable to ordinary shareholders 526 042(1) 434 375(1)
(7)
2. Weighted average number of ordinary shares
2005 2004
01/01/04 Balance 400 000 400 000
30/06/05 Rights issue

400 000 x 1,0232558141 409 302(½)
(400 000 x 1,023255814) + (440 000 x 6/12)
424 651(½)
31/08/05 Capitalization issue (2/15)
56 620(1P) 54 574(1P)
31/11/05 New issue (60 000 x 1/12)
5 000(½)
486 271 463 876
(3½)
Calculation for rights issue:

2005 2004
Actual Weighted Actual Weighted
Balance 400 000 400 000 400 000 400 000
Rights issue at full value
400 000 x 1/10 = 40 000
40 000 x 3,00/4,00 30 000
30 000 x 6/12 15 000
430 000 415 000 400 000 400 000
Bonus element
(40 000 – 30 000) 10 000 9 651 9 302
440 000 424 651 400 000 409 302
Page 44 of 79
OR
400 000 x R4, 00 + (40 000 x R3, 00)

400 000 + 40 000
= R1 600 000 + R120 000

440 000
= R3, 909090909
Computation of adjustment factor
R4, 00
R3, 909090909
= 1,023255814
Thus: 2004: 400 000 x 1,023255814 = 409 302

2005: (400 000 x 1, 023255814) + (440 000 x 6/12) = 424 651
3. Earnings per ordinary share 526 042 434 375

486 271 463 876
108, 17 cents (1) 93, 64 cents (1)
4. Earnings per part. Preference share 143 958 125 625

500 000 500 000
29 cents (1) 25 cents (1)
5. Dividend per ordinary share 250 000 200 000

558 667 400 000
44.75 cents (1) 50 cents (1)
(6)
Page 45 of 79
QUESTION 13
On 1 July 2006 the ordinary share capital of Dairy mate Limited consisted of R2 ordinary
shares amounting to R500 000 and the 12% participating preference shares consisted of
R0.50 shares amounting to R250 000.
The participating preference shareholders are entitled to 10% of the dividend and
earnings paid to ordinary shareholders over and above the fixed dividend.
1. On 1 July 2007, the company issued 150 000 share options (that vested
immediately) to a number of directors to subscribe for shares at R2 each. The fair
value of one share was R3. None of the share options had been exercised by
30 June 2008.
2. On 1 January 2007, the company issued 80 000 ordinary shares at a premium of

R3.50 a share.
3. On 1 March 2008, the company issued 75 000 ordinary shares at a premium of

R5 a share.
4. On 30 June 2008, the statement of comprehensive income (income statement)

reflected a profit for the period of R900 000 (2007: R500 000).
5. Income tax is calculated at a rate of 29%.
Calculate and disclose the earnings per share and diluted earnings per share
information (if applicable) of Dairy mate Limited for the year ended 30 June 2008 in
accordance with Statements of Generally Accepted Accounting Practice.
NOTE: COMPARATIVES ARE REQUIRED.

SHOW ALL YOUR CALCULATIONS.
Page 46 of 79
Calculation of average weighted number of share for basic EPS
Total Average Average
weighted weighted
number of number of
shares shares
2008 2007
Opening balance on 01/07/2007 250 000 250 000 250 000
Share issue on 1/1/2007 80 000 80 000 40 000 ½
330 000 330 000 ½ 290 000
Share issue on 1/3/2008 75 000 25 000 ½ -
405 000 355 000 290 000 ½
(2)
Calculation of average weighted number of share for diluted EPS
Average Average
weighted weighted
number of number of
shares shares
2008 2007
Number of shares for basic earnings 355 000 Θ 290 000 Θ
Share options 50 000 √ 50 000 √
R2 x 150 000 = R300 000
R300 000 / R3 = 100 000
150 000 – 100 000 = 50 000
405 000 340 000
(3)
Calculation of earnings for basic EPS
Ordinary Preference Ordinary Preference
shares shares shares shares
2008 2008 2007 2007
R R R R
Preference dividend
(R250 000 x 12%) (30 000) ½ 30 000 (30 000) ½ 30 000
870 000 30 000 470 000 30 000
Allocation of earnings
R870 000 x 10/110 (79 091) √ 79 091
R470 000 x 10/110 (42 727) √ 42 727
790 909 109 091 427 273 72 727
(3)
Calculation of earnings for diluted EPS
2008 2007
R R
Basic earnings 790 909Θ 427 273Θ
(1)
Page 47 of 79
Disclosure
Dairy mate Limited
Statement of comprehensive income for the year ended 30 June 2008
2008 2007
R R
Basic earnings per share 222.79 c Ø 147.34 c Ø

(R790 909 / 355 000) (R427 273 / 290 000)
Earnings per participating preference shares 21.82 c Ø 14.55 c Ø

(R109 091 / 500 000) (R72 727 / 500 000)
Diluted earnings per share 195.29 c Ø 125.67 c Ø

(R790 909 / 405 000) (R427 273 / 340 000)
Reconciliation of numerators used for basic and diluted earnings per share:
2008 2007
R R
Profit 900 000 500 000
Preference dividends (30 000) Θ (30 000) Θ
Earnings allocated to participating preference (79 091) Θ (42 727) Θ
shares
Numerator for basic earnings for profit for the 790 909 427 273
period
Numerator for diluted earnings for profit for the 790 909 Θ 427 273 Θ
period
Reconciliation of denominators used for basic and diluted earnings per share:
2008 2007
Shares Shares
Weighted average number of shares used for
basic EPS 355 000 Θ 290 000 Θ
Options 50 000Θ 50 000 Θ
diluted EPS 405 000 340 000
(11)
Page 48 of 79
QUESTION 14
The statement of financial position (balance sheet) of Hillside Limited on 1 July 2007 reflected
ordinary share capital of R500 000 and 10% convertible preference share capital of R250 000.
The ordinary share capital consisted of shares with a nominal value of R0.50 each and the 10%
convertible preference share capital consisted of shares with a nominal value of R1 each.
1. On 30 November 2008 the directors decided to issue 300 000 ordinary shares at R2.50
each.
2. On 1 February 2008 a one for five capitalisation issue of ordinary shares took place.
3. All the 10% convertible preference shares were issued on 1 July 2005 and were
convertible into ordinary shares at the option of Hillside Limited. Fifty percent of the
preference shares were converted into ordinary shares on 1 April 2008, in the ratio of
one ordinary share for every two preference shares held. The remaining preference
shares were only to be converted into ordinary shares during the 2009 financial year,
under the same conditions.
4. On 30 June 2008 the STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME reflected a profit for the period of R900 000.
6. Income tax is calculated at a rate of 29%.
Calculate and disclose the earnings per share and diluted earnings per share
information of Hillside Limited for the year ending 30 June 2008 in accordance with
Statements of Generally Accepted Accounting Practice.
NOTE: Comparatives are not required.

SHOW ALL YOUR CALCULATIONS.
Page 49 of 79
Calculation of average weighted number of shares for basic EPS
Average
Total weighted
Actual number of
shares
2008
Opening balance on 01/07/2007 1 000 000 1 000 000 √
Share issue on 30/11/2007 300 000 175 000 √
(300 000 x 7/12)
1 300 000 1 175 000
Capitalisation issue on 01/02/2008 260 000 235 000 √
(1 300 000 / 5) (1 175 000 / 5)
1 560 000 1 410 000
Conversion of preference shares on 62 500 15 625 √
01/04/2008 (250 000 x 50% / 2 = 125 (62 500 x 3/12)
000)
½
(125 000 / 2 = 62 500) ½
1 622 500 1 425 625
(5)
Calculation of average weighted number of shares for diluted EPS

Average weighted
number of shares
2008
Number of shares for basic earnings 1 425 625
Convertible preference shares 109 375
((250 000 x 50%) / 2 = 62 500) ½
((250 000 x 50%) / 2 x 9/12 = 46 875) ½
(62 500 + 46 875 = 109 375)
1 535 000
(1)
Calculation of earnings for basic EPS

2008
R
Profit for the period 900 000
Preference dividend
(R250 000 x 10% x 50% x 9/12) (9 375) √
(R250 000 x 10% x 50%) (12 500) √
Basic earnings 878 125
(2)
Calculation of earnings for diluted EPS
2008
R
Preference dividend (R9 375 + R12 500) 21 875 √
(1)
Page 50 of 79
Disclosure
Hillside Limited
Statement of comprehensive income for the year ended 30 June 2008
2008
R
Basic earnings per share 0.62 centsØ

(R878 125 / 1 425 625)
Diluted earnings per share 0.59 cents Ø

(R900 000 / 1 535 000)
Reconciliation of earnings (numerators) used for basic and diluted earnings per share:
2008
R
Preference dividends (21 875) Θ
Preference dividends on convertible preference shares 21 875 Θ
Earnings for diluted earnings per share 900 000
Reconciliation of shares (denominators) used for basic and diluted earnings per share:
2008
Shares
Weighted average number of shares used for basic EPS 1 425 625 Θ
Convertible preference shares 109 375 Θ
Weighted average number of shares used for diluted EPS 1 535 000
The weighted average number of shares was calculated after taking into account a
capitalisation issue on 30 November 2007. √ (5)
Page 51 of 79
QUESTION 15
Merloti Limited provided you with the following information regarding their
ordinary and preference share capital:
On 1 June 2006 the share capital consisted of the following:

 400 000 ordinary R2 shares
On 31 January 2007 there was a rights issue of 100 000 ordinary shares for cash, at fair
value.
On 1 June 2007, 100 000 8% participating preference shares of R1 each were issued for
cash.
On 1 September 2007, 200 000 ordinary R2 shares were issued at a premium of 50c
each.
On 1 October 2007 a capitalization issue of 2 ordinary shares for every 5 ordinary

shares held took place.
On 1 June 2007 the company issued 150 000 12% debentures of R1 each at a fair value
of R1 each. These debentures can be converted in 2010 at the option of the holder, into
150 000 ordinary shares. The 12% is a market related rate.
1. The preference shareholders are entitled to 25% of the dividends paid to ordinary
shareholders, over and above the fixed dividend.
2. The profit for the year amounted to R3 500 000 (2007: R2 900 000).
3. The tax rate for all years under review was 29%.
Calculate and disclose the earnings per share and diluted earnings per share (if
applicable) in the statement of comprehensive income (income statement), of Merloti
Limited for the year ended 31 May 2008. No notes are required. Your answer must
comply with Statements of Generally Accepted Accounting Practice.
NB: - Comparative figures are required.

- Show all your calculations
Page 52 of 79
MERLOTI LIMITED
Calculation of earnings:
31/5/2008 31/5/2007
R R
Profit for the year (given) 3 500 000 2 900 000
Preference dividend (8 000) ½ -
(100 000 x R1 x 8%)
3 492 000 2 900 000
Split:
Ordinary shares
(R3 492 000 x 100 / 125) 2 793 600 ½ 2 900 000 ½
Participating preference shares
(R3 492 000 x 25 / 125) 698 400 ½ -
3 492 000 2 900 000
Total earnings for participating preference shares
(R698 400 + R8 000) 706 400 √ -
(3)
Calculation of the weighted average number of shares

31/5/2008 31/5/2007
Total WAN Total WAN
1/6/06
Opening balance 400 000 400 000
31/1/07
Rights issue 100 000 ½ *33 333 √
*(100 000 X 4/12)
500 000 433 333
1/6/2008
Opening balance 500 000 ½ 500 000
1/9/2007
Share issue 200 000 ½ **150 000 √
**200 000 X 9/12
700 000 650 000 500 000 433 333
1/10/09
Capitalisation issue ***280 000 260 000 ½P 200 000 173 333 ½P
***700 000 X 2/5
980 000 910 000 700 000 606 666
(4.5)
Calculation of earnings for diluted EPS:
2008 2007
R R
Earnings (as calculated above) 2 793 600 ½ 2 900 000
Debenture interest after tax
(150 000 x R1 x 12%) x 71% 12 780 √
2 806 380 2 900 000
(1.5)
Page 53 of 79
Calculation of the weighted average number of shares for diluted EPS
2008 2007
Total Average Total Average
WAN for basic EPS 980 000 910 000 700 000 606 666
Shares from convertible 150 000 150 000 √ - -
debentures
1 130 000 1 060 000 √ 700 000 606 666
(2)
Disclosure:
MERLOTI LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MAY 2008
2008 2007
R R
Basic earnings per ordinary share
(R2 793 600 / 910 000) 306.9c √P
(R2 900 000 / 606 666) 478.02c √P
(R706 400 / 100 000) 706,4c √P -
Diluted earnings per ordinary share
(R2 806 380 / 1 060 000) 264.75c √P -
(4)
Page 54 of 79
QUESTION 16
The share capital of Buzz Limited on 1 September 2007, consisted of 300 000 ordinary
shares of R2 each.
The following share transactions took place:
1 December 2007
Ordinary shares were issued at a premium of 50c. The total consideration received in
cash amounted to R200 000.
31 January 2008
A capitalization issue took place according to which two shares were awarded for every
four shares held.
1 June 2008
Ordinary shares were issued in terms of a rights issue in the ratio of 1 share for every 10
shares held on this date, at R3 a share. The fair value just before the rights issue was
R4 per share.
The profit for the period of Buzz Limited amounted to R900 000 for the year ended
31 August 2008 (2007:R800 000).
Calculate and disclose the earnings per share in the financial statements of Buzz Limited
for the year ended 31 August 2008 in accordance with Statements of Generally
Accepted Accounting Practice.
NB: Show all your calculations.

Comparatives ARE required
Page 55 of 79
Calculation of weighted average number of shares for basic EPS
Total Weighted Weighted
average average
number of number of
shares shares
2008 2007
Opening balance on 1/9/2007 300 000 300 000(½) 300 000

Share issue on 1/12/2007 80 000(√) 60 000
R200 000 / R2,50 (½) x 9 / 12 (½)
380 000 360 000 300 000
Capitalization issue on 31/1/2008 190 000(½) 180 000(½) 150 000(½)
2 for 4
570 000 540 000 450 000
Rights issue on 1/6/2008
570 000/10*1 = 57 000
57 000*3/4 = 42 750 for value 42 750 10 688 0
42 750 (½P) x 3/12(½)

Bonus element
(57 000 (½P) – 42 750(½P)) 14 250√P 12 807√P 10 465√P
(14 250 / 612 750 x 550 688)
(14 250 / 612 750 x 450 000)
627 000 563 495 460 465
(12)
Calculation of earnings for basic EPS per ordinary share

2008 2007
R R
Profit for the year (given) √ 900 000 800 000
(1)
Disclosure:
Buzz Limited
Statement of comprehensive income for the year ended 31 August 2008
Note 2008 2007
R R
Basic earnings per share 2 1.60c 1.74c

(R900 000 (½) / 563 495 (½P))
(R800 000 (½) / 460 465 (½P))
Page 56 of 79
Notes for the year ended31 August 2008
Reconciliation of numerators used for basic earnings per share (½)

2008 2007
R R
Profit 900 000 800 000(½)
Reconciliation of denominators used for basic earnings per share (½)

2008 2007
Shares Shares
Weighted average number of shares 563 495 460 465 (½P
The calculation of basic earnings per ordinary share is based on basic

earnings of R900 000 (2007: R800 000) and 563 495 (2007: 460 465)
weighted average number of ordinary shares after a capitalization issue
on 31 January 2008. Comparative amounts have been restated
accordingly. (√√)
(6)
Page 57 of 79
QUESTION 17
The following information regarding Amphora Limited is presented to you:
The following extract is presented to you:
AMPHORA LIMITED
EXTRACTS FROM THE STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016
2016 2015
R R
Profit for the year before taxation 1 000 000 590 000
Taxation for the year (200 000) (90 000)
800 000 500 000
 On 30 June 2014, the closing balances of the following shares were:

o 600 000 Ordinary shares issued R1 000 000
o 100 000 10% cumulative convertible preference shares R200 000
 The dividends paid on the 10% cumulative convertible preference shares were
dealt with as normal dividend pay-outs in the Statement of changes in equity and
not as a finance charge expense.
 Due to a cash flow problem, Amphora Limited did not provide for or paid out the
preference dividends for the 2015 financial year although it provided for and paid
out the ordinary dividends. Amphora Limited paid out both the 2015 and 2016
financial years’ preference dividends in 2016.
 On 1 January 2015, the directors decided to issue 300 000 ordinary shares at
R2, 50 per share.
 On 1 May 2016, the directors decided to make a capitalisation issue of ordinary
shares of 2 for every 5 ordinary shares held.
 All the 10% cumulative convertible preference shares were convertible into
ordinary shares at the option of Amphora Limited. The directors decided that the
preference shares were to be converted in the ratio of 1 ordinary share for every
5 10% cumulative convertible preference shares held, and as follows:
o Fifty percent on 30 June 2016
o Fifty percent on 30 June 2017
YOU ARE REQUIRED TO

Prepare and disclose the basic earnings per share and the diluted basic earnings per
share in the relevant extracts from the financial statements of Amphora Limited for the
year ended 30 June 2016 in accordance with International Financial Reporting
Standards and JSE listing requirements.
Comparative figures are required

Show all calculations
Page 58 of 79
DISCLOSURE:
AMPHORA LIMITED
EXTRACTS FROM THE STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016
2016 2013
R R
Profit for the year before taxation 1 000 000 590 000
Taxation for the year (200 000) (90 000)
800 000 500 000
Basic earnings per share 57,12c[½P] 13,33c[½P]

Diluted basic earnings per share 56,01c[½P] 12,88c[½P
[1 basic mark for I/S]
AMPHORA LIMITED
EXTRACTS FROM THE NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED 30 JUNE 2016
Earnings per share
The calculation of basic earnings per share is based on earnings of R780 000 [½P]
(2015: R480 000 [½P]) and on weighted average [½] of 1 260 000 (2015: 1 050 000)
shares after the ordinary share issue [½] on 1 January 2015 and the capitalisation issue
[½] on 1 May 2016 and the conversion [½] of the preference shares on 30 June 2016.
The basic earnings per share for 2015 have been adjusted [½] accordingly.

[½P] (2015: R480 000[½P]) and on weighted average [½] of 1 280 000 (2015: 1 090
000) shares after the ordinary share issue [½] on 1 January 2015 and the capitalisation
issue [½] on 1 May 2016 and the conversion [½] of the preference shares on 30 June
2016. The basic earnings per share for 2015 have been adjusted [½] accordingly.
[7]
Reconciliation of basic earnings and diluted basic earnings

2016 2015
R R
Profit for the year after taxation 800 000 500 000
Preference dividends (10 000) [½] (10 000) [½]
Preference dividend on convertible pref. shares 10 000 10 000
Headline basic earnings 800 000 500 000
[1]
Page 59 of 79
Reconciliation of shares used for basic earnings and diluted basic earnings per
share calculation
2016 2015
Basic earnings per share 1 260 000 1 050 000
Convertible preference shares 20 000[½] 40 000[½]
Weighted average number of shares used for Diluted
earnings per share 1 280 000 1 090 000
[1]
CALCULATIONS:
Calculation of number of ordinary shares:
Balance 1 June 2015 600 000 600 000 600 000
Issued 1 January 2015 (6/12) 300 000 300 000[½] 150 000[½]
900 000 900 000 750 000
Capitalisation issue 1 May 2016 360 000[1] 360 000[½] 300 000[½]
1 260 000 1 260 000 1 050 000
Conversion of preference shares on 30 10 000[2] [½] 0[2] [½] 0
June 2016
Balance 30 June 2016 1 270 000 1 260 000[½] 1 050
000[½]
1. 900 000/5 X 2 = 360 000 750 000/5 X 2 = 300 000
2. 50% X 100 000/5 = 10 000 for nil days.
[4]
Calculation of average weighted number of shares for diluted EPS:

Number of equity shares (see above) 2016(WANS) 2015
Number of shares for basic earnings (above) 1 260 000 1 050 000
Convertible preference shares
50% of 100 000/5 = 20 000 20 000
50% of 100 000/5 X nil days 0 20 000
Balance used for calculations 1 280 000 1 090 000
Calculation of basic earnings per share:

2016 2015
R R
Profit for the period after tax 800 000 500 000
Preference dividend
50% of 10% X R200 000 X 12/12 (10 000) (10 000)
50% of 10% X R200 000 (10 000) (10 000)
Page 60 of 79
Calculation of diluted basic earnings per share:
2016 2015
R R
Basic earnings (see above) 780 000 480 000
Preference dividend
50% of 10% X R200 000 X 12/12 10 000 10 000
50% of 10% X R200 000 10 000 10 000
Balance used for calculations 800 000 500 000

Basic earnings per share 2016 780 000/1 260 000 = 61,90c
Basic earnings per share 2015 480 000/1 050 000 = 45,71c

Headline basic earnings per share 2016 780 000/1 280 000 = 60,94c
Headline basic earnings per share 2015 480 000/1 090 000 = 44,04c
Page 61 of 79
QUESTION 18
The following information concerning Moss Limited is presented to you:

EXTRACT FROM PRE – ADJUSTMENT TRIAL BALANCE AT 31 DECEMBER
2017
2017 2016
R R
Ordinary dividends (5 000) (10 000)
Preference dividends (3 600) 0
231 400 230 000
The abridged of statement of comprehensive income for the year ended 31

December 2016 and 2017 is as follows:
MOSS LIMITED
2017 2016
R R
 On 1 January 2017, the directors declared a capitalisation issue of 5 new
ordinary shares for every 10 ordinary shares already held.
 On 30 June 2017, the directors declared a rights issue of ordinary shares
of two new ordinary shares for every five ordinary shares held on
30 June 2017 for R2, 00 per share. The fair value of the ordinary shares
immediately before the rights issue was R5, 00 per share.
 On 31 August 2017, the directors issued 40 000 ordinary shares at R4 to
finance the extension of its blasting plant.

1. Prepare and disclose basic earnings per share and dividend per share in the relevant
extracts from the financial statements of Moss Limited for the year ended 31
December 2017 in accordance with International Financial Reporting Standards.
Page 62 of 79
QUESTION 18 - SUGGESTED SOLUTION
(a) DISCLOSURE
MOSS LIMITED
2017 2016
R R
Basic earnings per share 0, 43½P 0, 53½P
MOSS LIMITED
Dividends per ordinary share 0, 02½P 0, 10½P
Adjusted dividends per ordinary share 0, 02½P 0, 06½P
MOSS LIMITED
Earnings per share
(2016: R96 850) and on weighted average of 208 850 shares in issue (2016:
181 034) √P after the capitalisation issue on 1 January 2017 and rights issue on
30 June 2017. The basic earnings per share for 2016 have been adjusted
accordingly. √P

2017 2016
R R
Preference dividends (3 600)(1) ½ (3 600) ½
(1) R40 000*9%
(b) CALCULATIONS
Page 63 of 79
Balance 1 January 100 000 100 000 100 000
Capitalisation issue - no value 1/1/2017 50 000(1) 50 000(1) √ 50 000(1) √
150 000 150 000 150 000
Rights issue – Issue for value 30/6/2017 24 000(2) 12 000(3) √ 0
174 000 162 000 150 000
Rights issue – Issue for no value 30/6/2017 36 000(2) 33 517(4) √ 31 034(5) √
210 000 195 517 181 034
Share issue for value 31/8/2017 40 000 13 333(6) ½ 0
(1) 100 000/10*5
(2) 150 000/5*2 = 60 000*R2 = R120 000 cash received on share issue
R120 000/5 = 24 000 issue for value½
60 000 - 24 000 = 36 000 issue for no value½
(3) 24 000*6/12
(4) 36 000/174 000*162 000
(5) 36 000/174 000*150 000
(6) 40 000*4/12

Basic earnings per share 2017 = 89 150/208 850 = 0, 43 ½P
Dividend per share

Dividend per share 2017 = 5 000/250 000 = 0, 02 ½P
Dividend per share 2016 = 10 000/100 000 = 0, 10½P
Adjusted dividend per share 2016 = 10 000/181 034 = 0, 06½P
Page 64 of 79
QUESTION 19
The following information concerning India Limited is presented to you:

The abridged of statement of profit or loss and other comprehensive income for
the year ended 31 December 2016 and 2017 is as follows:
INDIA LIMITED
INCOME
2017 2016
R R
Profit /(loss) before tax 250 000 (100 000)
Income tax expense (75 000) 30 000
 The company was incorporated on 1 January 2016, on that day the
company issued 100 000 ordinary shares and 10% 50 000 cumulative
preference shares, all of which were issued at a price of R1.00 per share.
 On 30 June 2016, 50 000 ordinary shares were issued at R1.00 per share.
 On 30 October 2017, the directors of India Limited decided to make a
capitalisation issue of 1 ordinary share for every 5 ordinary shares held.
 There are 200 000 ordinary shares options in issue since incorporation
entitling the share option holders to take up 2 ordinary shares for every 5
ordinary shares options held at R2.50 per share. The average market
price of an ordinary share for 2017 is R3.00 per share. All ordinary share
options were issued on 1 November 2017.
 The profit/ (loss) before tax includes a profit on sale of assets of R20 000
(2016: R10 000) for both years. Profit on sale of assets is fully taxable.
 The normal tax rate is 30% since incorporation.

1. Prepare and disclose basic earnings per share, headline basic earnings per share
and diluted basic earnings per share in the extracts from the financial statements of
India Limited for the year ended 31 December 2017 in accordance with International
Financial Reporting Standards and JSE Listing requirements.
Page 65 of 79
(a) DISCLOSURE
INDIA LIMITED
2017 2016
R R
Profit /(loss) before tax 250 000 (100 000)
Income tax expense (75 000) 30 000
Profit (loss) for the year 175 000 (70 000)
Total comprehensive income /(loss) for the 175 000 (70 000)
year
Basic earnings / (loss) per share 0, 94½P (0, 50) ½P
Headline basic earnings / (loss) per share 0, 86½P (0, 54) ½P
Diluted basic earnings per share 0, 93½P 0, 00½P
INDIA LIMITED
Earnings per share
The calculation of basic earnings per share is based on earnings / (loss) of
R170 000 (2016: loss R75 000) and on weighted average of 180 000 shares in
issue (2016: 150 000) √P after the capitalisation issue on 30 October 2017. The
basic earnings per share for 2016 have been adjusted accordingly. √P
The calculation of headline basic earnings per share is based on earnings of /
(loss) R156 000 (2016: loss R82 000) and on weighted average of 180 000
shares in issue (2016: 150 000) √P after the capitalisation issue on 30 October
2017. The headline basic earnings per share for 2016 have been adjusted
accordingly. √P
The calculation of diluted basic earnings per share is based on earnings of
R170 000 and on weighted average of 182 222 shares in issue after the share
options on 1 November 2017. √P
Page 66 of 79
2017 2016
R R
Profit (loss) for the year 175 000 (70 000)
Preference dividends (5 000)(1) ½ (5 000)(1) ½
Basic earnings /(loss) 170 000 (75 000)
Less: Profit on sale (14 000)(3) ½ (7 000)(2) ½
Headline basic earnings /(loss) 156 000 (82 000)
(1) R1*50 000*10%
(2) R10 000*70%
(3) R20 000*70%
(b) CALCULATIONS
Number of equity shares Actual 2017 Actual 2016
Balance 1 January 150 000 150 000 100 000 100 000
Issue for value 30/6/2016 0 0 50 000 25 000(1) ½
150 000 150 000 150 000 125 000
Capitalisation issue - no value 30 000(3) 30 000(3) ½P 30 000(3) 25 000(2) ½
Balance 31 December 2017 180 000 180 000 180 000 150 000
(1) 50 000*6/12
(2) 125 000/5 shares*1 shares
(3) 150 000/5 shares*1 shares
Diluted number of shares Actual 2017

Balance 1 January 180 000 180 000
Share options 1/11/2017 80 000(1) ½ 2 222(2) ½
(1) 200 000/ 5 options*2 shares
(2) 80 000*R2.50/R3 = 66 667 for value
80 000 – 66 667 = 13 333 for no value
13 333*2/12

Basic loss per share 2016 = (75 000)/150 000 = (0, 50) ½P

Headline basic earnings per share 2017 = 156 000/180 000 = 0, 86 ½P
Headline basic loss per share 2016 = (82 000)/150 000 = (0, 54) ½P

Diluted basic earnings per share 2017 = 170 000/182 222 = 0, 93½P
Page 67 of 79
QUESTION 20
The following information concerning Geneva Limited is presented to you:

GENEVA LIMITED
INCOME
2017 2016
R R
Profit after taxation for the year 350 000 70 000
 The company was incorporated on 1 January 2015, same day the
company issued 200 000 ordinary shares and 10% 100 000 redeemable
convertible preference shares, all type of shares were issued at a price of
R1.00 per share.
 10% 100 000 redeemable convertible preference shares are converted at
the option of the company at the ratio of one ordinary share for every 5
redeemable convertible preference shares held.
 On 30 June 2015, 100 000 ordinary shares were issued at R1.00 per
share.
 On 30 June 2016, the directors of Geneva Limited decided to redeem 50%
of the redeemable convertible preference shares.
 On 1 April 2017, the company had a rights issue of 2 ordinary shares for
every 10 ordinary shares held at an issue price of R1 per share.
The average market price of an ordinary share for 2017 is R5.00 per
share.
 Ordinary share dividends were not declared for 2017 and 2016. Fixed
preference dividends were declared since incorporation.

1. Prepare and disclose basic earnings per share and diluted basic earnings per share
in the extracts from the financial statements of Geneva Limited for the year ended 31
December 2017 in accordance with International Financial Reporting Standards and
JSE Listing requirements.
Page 68 of 79
(a) DISCLOSURE
GENEVA LIMITED
INCOME
2017 2016
R R
GENEVA LIMITED
Earnings per share
346 154) √P after the rights issue on 1 April 2017. The basic earnings per share
R350 000 (2016: R70 000) and on weighted average of 371 538 shares in issue
(2016: 366 154) √P after the redeemable convertible preference shares in issue
during the year. The diluted basic earnings per share for 2016 have been
adjusted accordingly. √P
Reconciliation of basic earnings to diluted basic earnings

2017 2016
R R
Add: Preference dividend saving 7 500(2) √P 10 000 √P
(1) R1*100 000*10%
(2) R100 000*10%*6/12 + R50 000*10%*6/12
(3) R20 000*70%
Page 69 of 79
(b) CALCULATIONS
Balance 1 January 300 000 300 000 300 000
Rights Issue for value 1/4/2017 12 000(1) 9 000(2) ½ 0
312 000 309 000 300 000
Rights issue for no value 48 000(1) 47 538(3) ½ 46 154(3) ½
(1) 300 000/10*2 = 60 000*R1 = R60 000
R60 000/R5 = 12 000 for value½
60 000 – 12 000 = 48 000 for no value½
(2) 12 000*9/12
(3) 48 000/312 000*309 000 = 47 538
48 000/312 000*300 000 = 46 154

Balance 1 January 360 000 356 538 346 154
Convertible preference shares 10 000 15 000(2) √ 20 000(1) √
(1) 100 000/5*1 = 20 000
(2) 20 000*6/12 + 10 000*6/12


Diluted basic earnings per share 2016 = 70 000/366 154 = 0, 19 not dilutive
Page 70 of 79
QUESTION 21 15 Marks
The following information concerning Nigel Limited is presented to you:

2018 2017
R R
Preference dividends – 31 December 0 0
260 000 260 000
The abridged of statement of comprehensive income for the year ended

31 December 2017 and 2018 is as follows:
NIGEL LIMITED
2018 2017
R R
 On 1 January 2018, the directors declared a capitalisation issue of three

new ordinary shares for every ten ordinary shares already held.
 On 30 June 2018, the directors issued 20 000 ordinary shares at R2 to
finance future expansion.
 On 31 August 2018, the directors declared a rights issue of ordinary
shares of three new ordinary shares for every five ordinary shares held on
31 August 2018 for R4.00 per share. The fair value of the ordinary shares
immediately before the rights issue was R10.00 per share.
 On 1 March 2017, 100 000 share options were granted to employees as
part of an employee share scheme. In accordance with the option offer,
employees are entitled to take up, before 31 December 2019, two ordinary
shares of R4 each at R6 per share for every five options held. All share
options will be taken as per the employee scheme rules. The average
market value of one ordinary share during the year was R10.
Page 71 of 79
1. Prepare and disclose basic earnings per share and diluted earnings per share in the
relevant extracts from the annual financial statements of Nigel Limited for the year
ended 31 December 2018 in accordance with International Financial Reporting
Standards. (15 Marks)

(a) DISCLOSURE
NIGEL LIMITED
2018 2017
R R
Diluted earnings per share 1, 61(½P) 2, 08(½P)
NIGEL LIMITED
Earnings per share
167 742) (½P) after the capitalisation issue on 1 January 2018 and rights issue on 31
August 2018. The basic earnings per share for 2017 have been adjusted accordingly.
(½P)
Diluted earnings per share

The calculation of diluted earnings per share is based on earnings of R342 200
179 742) (½P) after the share options on 1 March 2017. The diluted earnings per share
for 2017 have been adjusted accordingly. (½P)
Page 72 of 79
2018 2017
R R
Preference dividends (28 800)(1)(½) (28 800)(½)
(1) 160 000 x 18%
(6)
(b) CALCULATIONS
Balance 1 January 100 000 100 000 100 000
Capitalisation issue - no value 1/1/2018 30 000(1) 30 000(1) (½) 30 000(1) (½)
130 000 130 000 130 000
Share issue for value 30/6/2018 20 000 10 000(2) (½) 0
150 000 140 000 130 000
Rights issue – Issue for value 31/8/2018 36 000(3) 12 000(4) (½) 0
186 000 152 000 130 000
Rights issue – Issue for no value 31/8/2018 54 000(3) 44 129(5) (½) 37 742(6) (½)
(1) 100 000/10 x 3
(2) 20 000x6/12
(3)150 000/5 x 3 = 90 000
90 000 x R4 = R360 000 cash received on share issue
R360 000/R10 = 36 000 issue for value (½)
90 000 - 36 000 = 54 000 issue for no value (½)
(4) 36 000 x 4/12
(5) 54 000/186 000 x 152 000 (½)
(6) 54 000/186 000 x 130 000 (½)
Number of diluted equity shares Actual 2018 2017

Balance 31 December 240 000 196 129 167 742
Options – for no value 1/3/2017 16 000(1) 16 000(1) (½) 12 000(2) (½)
(1) 100 000/5 x 2 = 40 000 x R6 = R240 000 cash to be received on share issue
R240 000/R10 = 24 000 for value
40 000 – 24 000 = 16 000 for no value (½)
(2) 16 000 x 9/12 (½)

Diluted earnings per share

Diluted earnings per share 2018 = 342 200/212 129 = 1, 61 (½P)
Diluted earnings per share 2017 = 373 000/179 742 = 2, 08 (½P)
(9)
Page 73 of 79
The following information concerning Puma Limited is presented to you:

2018 2017
R R
400 000 Ordinary shares issued 320 000 320 000
300 000 16% Cumulative participating preference shares 150 000 150 000
470 000 470 000
The abridged statement of comprehensive income and statement of change in

equity for the years ended 31 December 2017 and 2018 are as follows:
PUMA LIMITED
INCOME
2018 2017
R R
Profit /(loss) for the year 1 260 000 (200 000)
Total comprehensive income /(loss) for the year 1 260 000 (200 000)
 Profit before tax includes impairment of goodwill of R20 000 (2017: R15
000) and the profit on sale of land of R30 000 (2017: R40 000). South
African Revenue Services will allow the impairment of goodwill to be
deductible against future profits and the capital profit on sale of land is
partially taxable (50% of the capital profit on sale of land is taxable).
 Cumulative participating preference shares have an additional right of 2/8
of total dividends declared to ordinary shareholders.
 On 1 October 2018, ordinary shares were issued in terms of a rights issue
in the ratio of two ordinary shares for every ten ordinary shares held on
this date, at R4 a share. The fair value before the rights issue was R10 per
ordinary share.
 The tax rate for all years under review was 30%.

1. Prepare and disclose basic earnings per share, basic earnings per participating
preference share and headline basic earnings per share in the relevant extracts from
the financial statements of Puma Limited for the year ended 31 December 2018 in
accordance with International Financial Reporting Standards and JSE listing
requirements. (15 Marks)
Page 74 of 79
(a) DISCLOSURE
PUMA LIMITED
INCOME
2018 2017
R R
Total comprehensive income /(loss) for the year 1 260 000 (200 000)
Basic earnings/ (loss) per share 2, 18 (½P) (0, 40) (½P)
Basic earnings/ (loss) per participating preference share 0,90(½P) (0,07) (½P)
Headline basic earnings/ (loss) per share 2, 16 (½P) (0, 46) (½P)
(3)
PUMA LIMITED
Earnings per share

The calculation of basic earnings per share is based on earnings/ (loss) of
R988 800 (2017: loss of R179 200) (½P) and on weighted average of 453 333
(2017: 444 444) shares(½P) after the rights issue on 1 October 2018. The basic
earnings per share for 2017 have been adjusted accordingly.

The calculation of headline basic earnings per share is based on earnings/ (loss)
of R977 300 (2017: loss of R202 700) (½P) and on weighted average of 453 333
(2017: 444 444) shares (½P) after the rights issue on 1 October 2018. The
headline basic earnings per share for 2017 have been adjusted accordingly.

(2017: loss R20 800) (½P) and on weighted average of 300 000 (2017: 300 000)
participating preference shares in issue. (½P)
Page 75 of 79
2018 2017
R R
Preference dividends (24 000)(1) (½) (24 000)(1) (½)
Basic earnings 1 236 000 (224 000)
Participating preference share 2/10 (247 200) (2) (44 800) (2)
Basic earnings for ordinary shareholders 988 800 (179 200)
Impairment of goodwill 14 000(½) (3) 10 500 (½) (3)
Profit on sale of land (25 500)½) (4) (34 000) (½)
Headline basic earnings 977 300 (202 700)
(1) R150 000 x 16%

(2) R1 236 000 x 2/10
(224 000) x 2/10 (½)
(3) R20 000 x 70%
R15 000 x 70% (½)
(4) R30 000 – (R30 000*50%*30%) Tax portion
R40 000 – (R40 000*50%*30%) Tax portion
(7.5)
(b) CALCULATIONS
Balance 1 January 400 000 400 000 400 000
Rights issue – for value 1/10/2018 32 000 (1) 8 000(2) (½) 0
432 000 408 000 400 000
Rights issue – no value 1/10/2018 48 000(1) 45 333(3) (½) 44 444(3) (½)
(1) 400 000/10 x 2 = 80 000 shares
80 000 x R4/R10 = 32 000 issue for value
80 000 – 32 000 = 48 000 no value (½)
(2) 32 000 x 3/12
(3) 48 000/432 000 x 408 000
48 000/432 000 x 400 000

Basic earnings per share 2017 = (179 200)/444 444 = (0, 40) (½P)

Headline basic earnings per share 2018 = 977 300/453 333 = 2, 16(½P)
Headline basic earnings per share 2017 = (202 700)/444 444 = (0, 46) (½P)

= (24 000 + 247 200)/300 000 = 0, 90 (½P)
= (24 000 + -44 800)/300 000 = (0, 07) (½P)
Page 76 of 79
The following information concerning Park Limited is presented to you:

PARK LIMITED
2018 2017
R R
Profit before tax 1 000 000 200 000
 The company was incorporated on 1 January 2014, same day the
company issued 80 000 ordinary shares and 10% 100 000 convertible
cumulative preference shares, all type of shares was issued at a price of
R1.00 per share.
 10% 100 000 convertible cumulative preference shares are converted at
the option of the company at the ratio of four ordinary shares for every five
convertible cumulative preference shares held.
 On 30 June 2015, 120 000 ordinary shares were issued at R1.00 per
share.
 On 30 June 2017, the directors of Park Limited decided to convert 60% of
the convertible cumulative preference shares into ordinary shares.
 On 1 April 2018, the company had a rights issue of one ordinary shares
for every ten ordinary shares held at an issue price of R1 per share.
The average market price of an ordinary share for 2018 is R5.00 per
share.
 Ordinary share dividends were not declared for 2018 and 2017. Fixed
preference dividends were not declared or paid since 2016.

the extracts from the financial statements of Park Limited for the year ended
31 December 2018 in accordance with International Financial Reporting Standards
and JSE Listing requirements.
Page 77 of 79
(a) DISCLOSURE
PARK LIMITED
2018 2017
R R
Profit before tax 1 000 000 200 000
PARK LIMITED
Earnings per share
241 569) √P after the rights issue on 1 April 2018. The basic earnings per share
R700 000 (2017: R140 000) and on weighted average of 303 463 shares in issue
(2017: 297 569) √P after the convertible cumulative preference shares in issue
during the year. The diluted basic earnings per share for 2017 have been
adjusted accordingly. √P
Reconciliation of basic earnings to diluted basic earnings

2018 2017
R R
Add: Preference dividend saving 4 000(2) √P 7 000 √P
(1) R100 000*10% *40% + R100 000*10%*60%*6/12
(2) R100 000*10%*40
(3) R20 000*70%
Page 78 of 79
(b) CALCULATIONS
Number of equity shares Actual 2018 Actual 2017
Balance 1 January 248 000 248 000 200 000 200 000
Converted preference shares 0 0 48 000(1) 24 000(1) ½
248 000 248 000 248 000 224 000
Rights Issue for value 4 960(2) 3 720(2) ½ 0 0
1/4/2018
252 960 251 720 248 000 224 000
Rights issue for no value 19 840(2) 19 743(3) ½ 17 569 17 569(3) ½
½
Balance 31 December 2018 272 800 271 463 265 569 241 569
(1) 100 000 x 60% = 60 000/5 x 4 =48 000
48 000 x 6/12 = 24 000
(2) 248 000/10 x 1 = 24 800*R1 = R24 800
R24 800/R5 = 4 960 for value½
4 960 x 9/12 = 3 720
24 800 – 4 960 = 19 840 for no value
(3) 19 840/252 960*251 720 = 19 743
19 840/252 960*224 000 = 17 569

Balance 1 January 272 800 271 463 241 569
Convertible preference shares 32 000 32 000(2) ½ 56 000(1) ½
(1) 100 000/5*4 = 80 000 x 60% x 6/12 + 80 000 x 40%
(2) 80 000*40%

Diluted basic earnings per share 2017 = 140 000/297 569 = 0, 47 ½P
Page 79 of 79

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FINANCIAL ACCOUNTING IIIA

MODULE EARNINGS PER SHARE

ACCOUNTING STATEMENT IAS 33

CLASS EXAMPLES AND ADDITIONAL

SUPPLEMENTARY CONTENT SUGGESTED SOLUTIONS

The following information concerning Class Limited is presented to you:

The company was incorporated in 2010 with an issued capital of:

YOU ARE REQUIRED TO:

Earnings per share

Basic earnings per share

Reconciliation of basic earnings

Basic earnings per share

Dividend per share

The following information concerning Class Limited is presented to you:

The company was incorporated in 2010 with an issued capital of:

YOU ARE REQUIRED TO:

Earnings per share

Basic earnings per share

Reconciliation of basic earnings

Dividend per share

The following information concerning Class Limited is presented to you:

The company was incorporated in 2010 with an issued capital of:

YOU ARE REQUIRED TO:

Earnings per share

Basic earnings per share

Reconciliation of basic earnings

Basic earnings per share

Dividend per share

The following information concerning Class Limited is presented to you:

The company was incorporated in 2010 with an issued capital of:

YOU ARE REQUIRED TO:

Earnings per share

Basic earnings per share

Basic earnings per participating preference share

Reconciliation of basic earnings

Basic earnings per share

Basic earnings per participating preference share

Dividend per ordinary share

Dividend per participating preference share

The following information concerning Suarez Limited is presented to you:

YOU ARE REQUIRED TO:

Earnings per share

Basic earnings per share

Basic diluted earnings per share

Reconciliation of basic earnings

Diluted weighted average number of shares

Basic diluted earnings per share

The following information concerning Tap Limited is presented to you:

The company was incorporated in 2010 with an issued capital of:

YOU ARE REQUIRED TO:

Earnings per share

Basic earnings per share

Basic earnings per participating preference share

Reconciliation of basic earnings

Basic earnings per share

Basic earnings per participating preference per share

Dividend per share

Dividend per participating preference share

The following information concerning Brendon Limited is presented to you:

EXTRACT FROM PRE – ADJUSTMENT TRIAL BALANCE AT 31 DECEMBER 2012

 On 1 January 2012, the directors declared a capitalisation issue of three new

YOU ARE REQUIRED TO: