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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Kaveri Foods Ltd (year ended 31 March 2026) had 4,00,000 equity shares on 1 April 2025. On 1 July 2025 it issued 1,20,000 shares at full market price. On 1 October 2025 it made a bonus issue of 1 share for every 5 held (1,04,000 shares). Net profit for the year was ₹17,64,000. What is the basic EPS under AS 20?

Basic EPS is ₹3.00. The bonus issue is applied retrospectively, so the pre-bonus weighted shares of 4,90,000 are multiplied by 1.2 to give 5,88,000 weighted shares. Dividing the profit of ₹17,64,000 by 5,88,000 gives ₹3.00.

  1. A₹3.60
  2. B₹3.00Correct
  3. C₹2.97
  4. D₹2.83

Explanation

A bonus issue is applied as if it happened at the start of the earliest period, so it adjusts all prior shares. Before bonus: 4,00,000 + 1,20,000 × 9/12 = 4,90,000. Multiply by 1.2 (6 for 5) = 5,88,000. EPS = 17,64,000 ÷ 5,88,000 = ₹3.00. Weighting the bonus shares for the full year only on top of 4,90,000 gives ₹2.97, which is wrong.

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