Tutorial 6: Jane Lazar and Huang (4 Edition) - Chapter 35-MFRS133

Tutorial 6
Jane Lazar and Huang (4th Edition)-

Chapter 35-MFRS133
Question 2
page 694
Given below is the extract of statement of profit or loss of Ayer Bhd, a listed
company.
Profit form the year ended 30 June x5
RM
Profit before taxation 700,000
Taxation – 30% (200,000)
500,000
Dividends paid – ordinary shares 100,000
- preference shares 35,000
The following information is also provided:
a. Issued share capital on 1 July x4 comprises 2 million ordinary
shares and RM500,000 7% preference shares.
b. On 1 July x4, RM500,000 10% convertible debentures
(convertible into 200 ordinary shares per RM100 debenture)
were outstanding.
c. Changes in capital structure during the year ended 30 June x5
are as follows:
a. On 1 October x4, a rights issue of ordinary shares on a one-for-four
basis at 80 sen (market price before the issue was RM1) was made.
b. The basic EPS for the year ended 30 June x4 was 18 sen.
d. Tax rate is 30%.
Required:
e. Compute the company’s basic EPS for the current year and
comparative figure for the previous year.
f. Compute the diluted EPS for the current year.
(a)
Profit = profit after preference shareholders

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

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

= 465,000
2,395,833

Theoretical ex-right price

• (2mil x RM1) + (0.5mil x RM0.80)= RM2.4mil
• 2.4mil / 2.5mil = 0.96
or
Number of share x Price per share (RM) = Total (RM)
4 1 4
1 0.80 0.80
5 4.8
RM4.8 ÷ 5 = RM0.96
Restate EPS x4 18 sen x 0.96 = 17.3 sen
1
(b) Diluted EPS for current year
Diluted EPS presented should be the ‘worst’

possible.
Diluted EPS x5
• Profit after preference divd + interest after tax (no need to pay
since it is convert to OSC)
• Number of share (current after add right issue) + new OSC
(after covert from loan/pref.share)
Diluted EPS x5 = 465,000 + (10% x 500,000 x 70%) = 14.7 sen

2,395,833 + (500,000 x 200/100)
Question 3
page 694
Given below is the income summary for Travel Bhd for
the years ended 31 December x6 and x5:
X6 X5
RM’000 RM’000
Profit before taxation 500 450
Taxation (150) (140)

Ordinary dividends (50) (50)
The following information is relevant:
a. On 1 January x5, the issued share capital consisted of 2
million ordinary shares.
b. On 1 July x5, 1 million ordinary shares were issued for a fair
consideration of RM1.5 million.
c. On 1 January x5, options were granted to employees to
subscribe for 500,000 ordinary shares in Travel Bhd for
RM400,000.
d. The average market price of one ordinary share of Travel Bhd
for the year ended 31 December x5 and x6 was RM1 and
RM1.20 each, respectively.
e. On 1 April x6, the company bought back 500,000 ordinary
shares.
f. The net loss from discontinued operations for the year x6 was
RM100,000.
From the information given, you are required to calculated the
basic EPS and diluted EPS for years x5 and x6.
Basic EPS x5 = 450,000 – 140,000 ___ = 12.4 sen
(2m x 6/12) + (3m x 6/12)
Diluted EPS x5 = 450,000 – 140,000 ___ = 11.92 sen

2.5m + (500,000 x 0.2/1)*
*Share assume to be issued = 500,000 OSC
= 500,000 x (RM400k ÷ 500K) / RM1

=500,000 x RM0.80 /1
=400,000
Therefore, increase in shares outstanding = 500,000 – 400,000 = 100,000
Or
(based on working in *)
Basic EPS x6 = 500,000 - 150,000_____
(3m x 3/12) + (2.5m x 9/12)
350,000 = 13.33 sen
2.625m
Basic EPS x6 = 600,000 -150,000 ____

(Continuing (3m x 3/12) + (2.5m x 9/12)
operation)
450,000 = 17.1 sen
2.625m
Diluted EPS x6 = 500,000 – 150,000 ___ = 12.54 sen

2.625m + (500,000 x 0.4/1.2)
Diluted EPS x6 = 600,000 – 150,000 _______ = 16.12 sen

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

Basic EPS x3 10m/40m = 25 sen
Basic EPS x4 14.8m ______________ = 25.74 sen

(40m +10m* x 12/12) + ([8m +
2m**] x 9/12)
*40m x 1/4 = 10m

(bonus share need to be considering from the beginning
of the year)
**8m x 1/4 = 2m
Since bonus issue in on 1 Oct x4, new issue of 8mil also
need to take into consideration .
Restate EPS x3 25 sen x 40m/50m = 20 sen

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

= 16.8m = 21.54 sen
36m +42m
*Theoretical ex-right price

Number of share x Price per share (RM) = Total (RM)
5 4.8 24
2 2 4
7 28
RM28 ÷ 7 = RM4
**Right issue (1 July) = 2/5 x 60mil = 24mil

Total share = 60mil + 24mil = 84mil
Restate Basic EPS x4 25.74 sen x 4 sen = 21.45
4.80
Diluted EPS x5 16.8m______

78m + (24m x 1.5/4.5)*
= 16.8m = 19.53 sen

86 m
*Share assume to be issued = 24,000,000 OSC
= 24,000,000 x RM3 / RM4.5

=16,000,000
Therefore, increase in shares outstanding = 24,000,000 – 16,000,000 = 8,000,000
Or
Basic EPS x6 10.8m = 12.86 sen
84m

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

84m + (24m x 2/5)** + 20m***
*interest saving after tax

8% x RM40mil x 75% = 2.4mil
**Share assume to be issued = 24,000,000 OSC

= 24,000,000 x RM3 / RM5
=14,400,000
Therefore, increase in shares outstanding = 24,000,000 – 14,400,000 = 9,600,000
Or
***convertible loan to stock

RM40mil ÷ RM100 x 50 OSC = 20mil OSC

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Tutorial 6

Jane Lazar and Huang (4th Edition)-

Profit = profit after preference shareholders

Theoretical ex-right price

(b) Diluted EPS for current year

Diluted EPS presented should be the ‘worst’

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

Taxation (150) (140)

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

*Share assume to be issued = 500,000 OSC

= 500,000 x (RM400k ÷ 500K) / RM1

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

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

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

• Refer from textbook

Basic EPS x4 14.8m ______________ = 25.74 sen

*40m x 1/4 = 10m

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

*Theoretical ex-right price

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

Diluted EPS x5 16.8m______

= 16.8m = 19.53 sen

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

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

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

*interest saving after tax

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

***convertible loan to stock

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