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Hisa Company Ltd. was incorporated in 1988 with an issued share
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Hisa Company Ltd. was incorporated in 1988 with an issued share capital of 2,500,000 ordinary shares of Sh.10 each and 1,000,000 8% cumulative participating preference shares of Sh.10 each. All the shares were paid for in full.

In 1992, the company issued 2,500 10% debentures of Sh.1000 each. The terms of issue stipulate that each debenture is convertible into 75 ordinary shares of Sh.10 each on 31 December 2003 and those not converted will be redeemed at par on 31 December 2008.

On 1 March 1998, the company granted its directors options to take up 500,000 ordinary shares at a price of Sh.12 per share.

On 1 April 1999, the ordinary shares were split into shares of Sh.2.50 each and on 1 December 1999 a further 3,000,000 ordinary shares were issued at fair value to satisfy the purchase of certain business rights acquired.

On 2 December 1999, 200,000 of the above options were taken up when the fair value of the shares was Sh.6 each. The average fair value of the shares during the year was, Sh.5 each. The following information has been extracted from the consolidated income statements for the years ended 31 March 1999 and 31 March 2000.


2000

Sh. ?000?

1999

Sh. ?000?

Net operating income

19,800

18,410

Income from investments

   420

   360

Net income before taxation and extraordinary items

20,220

18,770

Taxation

(7,630)

(6,920)

Net income after taxation

12,590

11,850

Less: Minority interest

(1,270)

(1,440)

Profit attributable to members of the group

11,320

10,410

Extraordinary items

(2,000)

(1,500)

Profit after tax and extraordinary items

9,320

8,910

Dividends (Note 1)

(4,000)

(3,200)

Retained profits for the year

5,320

5,710

Retained profit brought forward

18,530

12,820

Retained profit carried forward

23,850

18,530

Note

Dividends paid 31 March:

                    On ordinary shares

3,200

2,400

                    On preference shares

  800

  800

4,000

3,200

Required:

(a)      Calculate the basic earnings per share figure to be disclosed in the published accounts of Hisa Company Ltd. for the years ended 31 March 1999 and 31 March 2000.      (12 marks)

(b)     Calculate the diluted earnings per share figure to be disclosed in the published accounts of Hisa Company Ltd. for the year ended 31 March 2000. Assume a tax rate of 32.5%

                                                                                                                                   (10 marks)

(c)         Discuss the usefulness of the earnings per share figure.          


(a)

 


 

Basic earnings per share

 


 

(i)

 


 

2000

 


 

1999

 


 

9,320,000

 


 

8,910,00

 

0

 


 

Basic earnings

 

Profit after tax and extraordinary items

 

Preference dividends

 


 

(800,000)

 

8,520,000

 


 

(ii)

 


 

Weighted average...

 







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