The following information has been extracted from the financial records of P Limited: Profit before tax for the year ended 31 st March, 2024…

CA Intermediate · Advanced Accounting · PYQS · January 2026
The following information has been extracted from the financial records of P Limited: Profit before tax for the year ended 31 st March, 2024 25,00,000 Profit before tax for the year ended 31 st March, 2025 32,50,000 Number of Equity Shares (Face Value - 5/- per share) outstanding as on 31 st March, 2024 12,00,000 Applicable Tax Rate for 2023-24 and 2024-25 20% On 1 st June, 2024, the Directors of P Limited announced a rights issue which entitled the existing shareholders to subscribe one share for every six shares held by them @20/- per share. The last date of exercising the rights was 30 th June, 2024 and the rights issue was subscribed in full. The fair value of one equity share immediately prior to exercise of right on 30 th June, 2024 was - 25/-. You are required to calculate the Basic Earnings per Share to be reported in the financial statements of P Limited for the year ended 31 st March, 2025 including the comparative figure for the year ended 31 st March, 2024 in accordance with AS 20.

Suggested Answer and Working Notes:

Computation of Basic Earnings Per Share (as per paragraphs 10 and 26 of AS 20 on Earnings Per Share) Particulars Year 2024 ₹ Year 2025 ₹ EPS for the year 2024 as originally reported Net profit of the year attributable to equity shareholders Weighted average number of equity shares outstanding during the year = (₹ 20,00,000 / 12,00,000 shares) 1.67 EPS for the year 2024 restated for rights issue = [ 20,00,000/(12,00,000 shares × 1.0294*)] 20,00,000/12,35,280 1.62 (approx.) EPS for the year 2025 including effects of rights issue 26,00,000 (12,00,000 shares x 1.029 × 3/12) + (14,00,000 shares × 9/12) 26,00,000 1.91 13,58,700 shares (approx.) Working Notes: 1. Calculation of Net Profit after tax (NPAT) 2024 = 25,00,000 – Tax 20% = 20,00,000 2025 = 32,50,000 – Tax 20% = 26,00,000 2. Computation of theoretical ex-rights fair value per share Fair value of all outstanding shares immediately prior to exercise of rights + Total amount received from exercise Number of shares outstanding prior to exercise + Number of shares issued in the excercise = (₹ 25 ×12,00,000 shares) + (₹ 20 × 2,00,000 shares) 12,00,000 shares + 2,00,000 shares 3,40,00,000 24.29 14,00,000 shares 3. Computation of adjustment factor Fair value per share prior to exercise of rights Theoretical ex - rights value per share 25 = 1.029 (approx.) 24.29 (Refer Working Note 2)

Topics: AS 20, AS 19

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