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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Kaveri Foods Ltd had 4,00,000 equity shares at the start of the year (1 April 2025). On 1 October 2025 it issued bonus shares in the ratio 1 for 4 by capitalising reserves. Net profit attributable to equity shareholders for 2025-26 is ₹18,00,000. What is the basic EPS for 2025-26 as per AS 20?

Basic EPS is ₹3.60. A bonus issue has no consideration, so the 1,00,000 bonus shares are treated as outstanding for the whole year rather than time-weighted. The weighted shares are 5,00,000, and ₹18,00,000 divided by 5,00,000 gives ₹3.60.

  1. A₹3.60Correct
  2. B₹4.00
  3. C₹4.50
  4. D₹3.00

Explanation

A bonus issue involves no consideration, so it is treated as if it had occurred from the start of the earliest period reported. Bonus shares = 1,00,000, so the weighted average number of shares = 5,00,000. EPS = 18,00,000 / 5,00,000 = ₹3.60. Time-weighting the bonus shares gives 4,50,000 shares and ₹4.00, which is wrong.

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