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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Kaveri Agro Ltd. had 4,00,000 equity shares on 1 April 2025. On 1 October 2025 it issued 2,00,000 shares for cash at full market price. On 1 January 2026 it issued bonus shares in the ratio of 1 share for every 2 shares held. Net profit for the year ended 31 March 2026 was ₹30,00,000. What is the basic EPS to be reported for 2025-26?

Basic EPS is ₹4.00. A bonus issue is applied retrospectively to all periods, with no time-weighting. The weighted shares before the bonus are 5,00,000, and the 1 for 2 bonus raises this to 7,50,000. Dividing ₹30,00,000 by 7,50,000 gives ₹4.

  1. A₹4.00Correct
  2. B₹6.00
  3. C₹3.33
  4. D₹5.22

Explanation

A bonus issue is adjusted as if it occurred at the start of the earliest period presented. Before the bonus, weighted shares = 4,00,000 + 2,00,000 x 6/12 = 5,00,000. Multiplying by 1.5 for the bonus gives 7,50,000. EPS = 30,00,000 / 7,50,000 = ₹4. Weighting the bonus shares only from 1 January gives 5,75,000 shares and ₹5.22, which is wrong.

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