Skip to content

CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Kaveri Textiles Ltd. reported a net profit after tax of Rs 15,00,000 for the year ended 31 March. It has 2,00,000 equity shares of Rs 10 each and 10,000 preference shares of Rs 100 each carrying 8% cumulative dividend. The preference dividend was not declared for the year. What is the basic EPS?

Basic EPS is Rs 7.10. For cumulative preference shares the year's dividend of Rs 80,000 is deducted from net profit even if undeclared, giving Rs 14,20,000 for equity holders, which is divided by 2,00,000 equity shares.

  1. ARs 6.50Correct
  2. BRs 7.50
  3. CRs 7.00
  4. DRs 7.10

Explanation

For cumulative preference shares, the dividend for the period is deducted whether or not it is declared. Preference dividend = 10,000 x 100 x 8% = Rs 80,000. Wait: 10,000 x 100 = Rs 10,00,000; 8% = Rs 80,000. Earnings for equity = 15,00,000 - 80,000 = 14,20,000; EPS = 14,20,000 / 2,00,000 = Rs 7.10. Rs 7.50 ignores the preference dividend.

Did you get it right without looking?

One question tells you little. A timed set on AS 20 Earnings Per Share shows your real accuracy, how long you take and where you lose marks.

Practise AS 20 Earnings Per ShareFree diagnostic mock

More AS 20 Earnings Per Share questions