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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Godavari Pumps Ltd had 2,00,000 fully paid equity shares of ₹10 each throughout the year. It also had 1,00,000 equity shares of ₹10 each, issued before the year began, on which only ₹6 per share has been called and paid. The partly paid shares are entitled to dividends in proportion to the amount paid. Net profit for the year is ₹9,10,000 and there are no preference shares. What is the basic EPS?

Basic EPS is ₹3.50. The partly paid shares, paid up to 60% and sharing dividends in proportion, count as 60,000 equivalent shares. Adding the 2,00,000 fully paid shares gives 2,60,000, and ₹9,10,000 divided by 2,60,000 equals ₹3.50.

  1. A₹3.03
  2. B₹4.55
  3. C₹3.79
  4. D₹3.50Correct

Explanation

Under AS 20, partly paid shares are treated as a fraction of an equity share to the extent they are entitled to participate in dividends relative to a fully paid share. Equivalent shares = 1,00,000 × 6/10 = 60,000. Weighted shares = 2,00,000 + 60,000 = 2,60,000. EPS = 9,10,000 / 2,60,000 = ₹3.50. ₹3.03 counts all 3,00,000 shares in full.

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