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Test Far570 Feb2021 - Ss

1. The document provides information and calculations regarding earnings per share (EPS) and diluted earnings per share (DEPS) for the years 2018 and 2019. Key dates that affect the calculations are January 1, 2019 and April 1, 2019. 2. It includes worked examples of basic EPS, weighted average number of shares, incremental EPS from convertible instruments, and the ranking and calculation of diluted EPS. The reported DEPS for 2019 is RM0.0780. 3. The document also includes a schedule of temporary differences for deferred tax calculations. It shows the calculation of deferred tax liabilities and assets, and the adjustment to current tax expense to arrive at the total tax expense.

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Putri Naajihah 4G
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208 views4 pages

Test Far570 Feb2021 - Ss

1. The document provides information and calculations regarding earnings per share (EPS) and diluted earnings per share (DEPS) for the years 2018 and 2019. Key dates that affect the calculations are January 1, 2019 and April 1, 2019. 2. It includes worked examples of basic EPS, weighted average number of shares, incremental EPS from convertible instruments, and the ranking and calculation of diluted EPS. The reported DEPS for 2019 is RM0.0780. 3. The document also includes a schedule of temporary differences for deferred tax calculations. It shows the calculation of deferred tax liabilities and assets, and the adjustment to current tax expense to arrive at the total tax expense.

Uploaded by

Putri Naajihah 4G
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Answer scheme

QUESTION 1

1. The date of the assumption of the conversion are on the 1 / January / 2019 and on the 1
/ April / 2019. The assumption of the date is important because it affects the calculation
of the weighted average number of shares used in the computation of the diluted earnings
per share. /
(5 x 1 = 5 marks)

2. BEPS (2018) = 800,000 √ / 6,000,000* = RM0.1333


BEPS (2019) = 600,000 √/ (7,000,000 + 300,000*) = RM0.08219

WANOS
Jan 2018 b/d 5,000,000√x6/12√ 2,500,000

July 2018 New issue 2,000,000


- Dec 7,000,000√ x 6/12√ 3,500,000
2018
7,000,000 6,000,000

Jan 2019 b/d 7,000,000


-Dec 2019
Conversion 300,000
(1m x 100/RM100) √ x
30%√
7,300,000 x 12/12 7,300,000
7,300,000 7,300,000

(8 x ½ = 4 marks)
3. DEPS

Workings RM
1. BEPS(2019) 600,000/7,300,000 0.08219

2. Compute the incremental EPS:

5% convertible debenture
Increase in earnings: 5% x RM1,000,000 x 70% x 76%
= RM26,600 ///
Increase in WANOS 1,000,000 x 100 / RM100 x 70%
-assumed conversion: = 700,000 ordinary shares ///
Incremental EPS RM26,600/700,000 RM0.038

Warrants
Increase in earnings: Nil /
Increase in WANOS 200,000 – [200,000 x 4/5]
-assumed conversion : 9/12(April-Dec)=30,000
Or
200,000 x (5-4)/5 x 9/12
=30,000
ordinary shares ///
Incremental EPS Nil/30,000 Nil

3.Rank the lowest incremental 1. Warrant / Nil


EPS
2. 5% Convertible debentures / RM0.038

4. Compute the DEPS following


the ranking

DEPS (warrant) RM600,000 / + nil / RM0.0819


7,300,000 / + 30,000 /

DEPS (5% convertible loan) RM600,000 / + RM26,600 / RM0.0780


7,300,000 / + 30,000/ +700,000 /

5. DEPS (2019) RM0.0780 /

Both Warrant and 5% convertible debenture has dilutive effect towards the BEPS, it has
to be included in the computation of the DEPS. Therefore, the DEPS of RM0.0780 would
be reported in the financial statement.

(22 x ½ = 11 marks)
(Total: 20 marks)

QUESTION 2
(a) Schedule of temporary differences

(a) Carrying Tax Base (TTD) (DTD)


amount
ASSETS: RM RM RM RM
Processing machines
Cost 303,000√ 303,000√
Accumulated depreciation
(303,000x 10% ) (30,300) √√
Initial allowance (10%) (30,300) √
Annual allowance (20%) (60,600) √
31/12/11 Carrying amount 272,700
Tax base 212,100 60,600√

Development cost 50,000 √ 0√ 50,000 √


Account receivable 80,000√ 80,000 √ -

LIABILITY:
Specific provision for doubtful 10,000 √ 0√ 10,000 √
debt
Penalties 10,000 Permanent
difference
√
TOTAL 110,600 10,000
TTD DTD
(16√ x ½ = 8 marks)

(b) TTD 100,600 √


Tax rate 24% √
DTL 24,144 √
(3√ x 1 = 3 marks)

(C) Tax expense

DEFERRED TAX
BALANCE B/D 20,000
SOPL 4144
BALANCE C/D 24,144

Deferred tax expense = 24,144 – 20,000


= RM4,144 √√

Current tax expense = (120,000 x 24%) √ – 4144 √


= 28,800 – 4144
= 24,656
(4√ x 1 = 4 marks)
Question 3

Transaction and transportation costs are not considered in identifying the principal market √,
because such a market is identified based only on the volume and level of activity √. However,
such costs are considered in identifying the most advantageous market, because it is identified
based on the net proceeds from the assumed transaction √.
Once the market for the transaction has been identified, the measurement of fair value is an
independent. Fair value is not adjusted for transaction costs because transaction costs are a
characteristic of the transaction, and not a characteristic of the asset or liability √. Fair value is
adjusted for transportation costs if location is a characteristic of the asset √.

5√ X 1=5 marks

(Total: 20 marks)

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