Class Practice Q12 - Topic 3 - Earnings Dividends

Financial Accounting 2B (MFAC62212) /
Accounting 2B (MACC62216) - 2023

Earnings and dividend per share (IAS 33) - Class Practice
Page 1 of 6
QUESTION 1:
Samsonite Ltd supplies you with the following information.
Capital structure on 31 December 2004.
Issued Share capital
R2 250 000 in Ordinary shares of R0.25 each.

R750 000 in 10% Cumulative preference shares of R0.50 each.
R1000 000 in 12% Non-cumulative preference shares of R1.00 each.
The abridged statement of Comprehensive income of the company for the year
ended 31 December 2005 is as follows:
R
Profit before tax = 975 000
Income tax = (225 000)
Profit after tax = 750 000
Retained earnings at 31 December 2004 amounted to R145 000.
Ordinary dividends (declared and paid) on 31 December 2005, Amounted to R360

000.
On 1 July 2005 the company made capitalisation issue out of retained earnings in
the proportion of one ordinary share for every five ordinary shares held on 30
September 2005.
REQUIRED
Calculate and disclose earnings and dividend per share in the statement of
comprehensive income. Notes to the statement of comprehensive income of
Samsonite Ltd for the year ended 31 December 2005 must also be prepared.
NB: Show all the calculations.
Page 2 of 6
Answer: Question 1
Samsonite Ltd
Statement of Comprehensive income for the year ended 31 December 2005
Net profit for the year R750 000
Earnings per share R0.05138
Statement of changes in equity

Dividends per share R0.0333
Notes to the statement of comprehensive income for the year ended 31
December 2005
The calculation of earnings per share is based on earnings of R555 000 and
weighted average of 10 800 000 ordinary shares issued, after taking into account
capitalisation issue on 30 September 2005.
Calculations
1. Earnings:
Net profit after taxation = R750 000
Less: Preference dividends
Cumulative = (R75 000) (10% x R750 000)
Non-cumulative = (R120 000) (12% x R1 000 000)
R555 000
2. Weighted average and actual ordinary shares issued

Actual 2005
Number of ord shares on 31/12/2004 9 000 000 9 000 000
Capitalisation issue (30/09/2005) 1 800 000 1 800 000
10 800 000 10 800 000
(R2 250 000 / R0.25 = 9 000 000 shares)

(9 000 000 shares / 5 shares = 1 800 000 shares)
3. Dividend per share
Dividends declared and paid = R360 000/10 800 000 shares) = R0.0333
4. Earnings per share: R555000/10 800 000 shares = R0.05138

Earnings per share and dividends per share can also be shown in cents.
Page 3 of 6
Question 2
Son Limited Suppliers you with the following information:

1. Capital structure at 31 December 2010 (share issued)
• R500 000 in 10% Non-cumulative preference shares of 50c each
• R1400 000 in ordinary shares of R2 each
2. On 1 May 2010 the company issued 1000 000 ordinary shares at R3 each.
3. On 1 October 2010 the company issued new ordinary shares by way of a

capitalization of reserves in the proportion of one shares for each five previously
held.
4. Net profit before tax amount R780 000 for the financial year 31 Dec 2010 and for
the financial year ended 31 Dec 2011 R1 100 000
• Normal tax for 2011 R155 000 and for 2010 is R130 000
You are required to:

Calculate and disclose earnings per share in the statement of comprehensive
income and notes to the statement of comprehensive income of Son Limited for the
Financial Year ended 31 Dec 2011. (Comparative figures must be shown).
Page 4 of 6
Answer: Question 2
SON LIMITED
Statement of comprehensive income for the year financial year ended 31 December
2011
2011 2010
Profit before tax 1 100 000 780 000

Less: Taxation (155 000) (130 000)
Profit for the period 945 000 650 000
Earnings per share R0.55 R0.71
Notes to the financial statement for the year ended 31 December 2011
The calculation of earnings per share is based on earnings of R895 000 2011 and
2010 is R600 000 and 1 640 000 ordinary shares for 2011 and 840 000 for 2010
issued after the capitalization on 01 October 2011. The earnings per share for 2010
have been adjusted accordingly.
Calculations:
1. Earnings for the financial year ended
31/12/2011 31/12/2010
Net profit after tax R945 000 R650 000
Less: preference dividend (R50 000) (R50 000)
Earnings R 895 000 R600 000
2. Weighted average number of shares
Actual 31/12/2011 31/12/2010

Number ord.shares 700 000 700 000 700 000
New issued 1000 000 666 667 --------____
1 700 000 1 366 667 700 000
Capitalization issue 340 000 273 333 140 000
2040 000 1 640 000 840 000
(R1 400 000 / R2 = 700 000 Shares)

(1 700 000 shares / 5 shares = 340 000 shares)
(1 000 000 shares /12 months = 83 333.3333 shares x 8 months = 666 667 shares)
New shares issued on 1 May 2010. Thus the new shares need to be weighted
based on the number of months)
(2011: capitalization: 1 366 667 shares / 5 shares = 273 333 shares)

(2010: capitalization: 700 000 shares / 5 shares = 140 000 shares)
(Capitalization: it is based on all previous shares plus the day capitalization started)
Page 5 of 6
3. Earnings per share: R895 000/1 640 000 shares = R0.55 (2011)
: R600 000 / 840 000 shares = R0.71
Earnings per share and dividends per share can also be shown in cents.
Page 6 of 6

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Financial Accounting 2B (MFAC62212) /

Accounting 2B (MACC62216) - 2023

Capital structure on 31 December 2004.

Issued Share capital

R2 250 000 in Ordinary shares of R0.25 each.

Retained earnings at 31 December 2004 amounted to R145 000.

Ordinary dividends (declared and paid) on 31 December 2005, Amounted to R360

NB: Show all the calculations.

Statement of changes in equity

2. Weighted average and actual ordinary shares issued

(R2 250 000 / R0.25 = 9 000 000 shares)

3. Dividend per share

4. Earnings per share: R555000/10 800 000 shares = R0.05138

Son Limited Suppliers you with the following information:

3. On 1 October 2010 the company issued new ordinary shares by way of a

You are required to:

Profit before tax 1 100 000 780 000

2. Weighted average number of shares

Actual 31/12/2011 31/12/2010

(R1 400 000 / R2 = 700 000 Shares)

(2011: capitalization: 1 366 667 shares / 5 shares = 273 333 shares)

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