During its accountingyear ending on December 31, 2007 the Zeal Pak Company hadthe cash sales Rs.280,000, the cost of goods sold Rs. 145,000 and the operatingexpenses of Rs. 50,000. Thecompany paid the Rs. 5,000 interest on debentures and tax @ 35%.The company furtherreported that the debtors on January 01, 2007 was Rs. 110,000,cash received from debtorduring the year Rs.60,000 and the debtor at December31st2007 was Rs.270,000.
At the year ending on31stDecember, 2006 the company had the netProfit after tax Rs. 155,000 and 20,000ordinary shares in issue. On January 1, 2007, Zeal Pak Co.issued 10% preference sharesof Rs. 150,000. On June 30, 2007 it proposed to make a 1 for5 rights issue at aprice of Rs. 4 per share. The market value of existing shares onJune 30, 2007, before the issueis made, was Rs. 6.
You arerequired to:
a) Prepare the Incomestatement for the year ending on 31st December 2007.
b) Profit availablefor distribution to the ordinary share holder at the year endingon 31st December 2007.
c) Calculate theoretical ex-rights price
d) Identify the bonus element in rights issue
e) Calculate the weighted average number of shares in the year 2006 and2007.
f) Earning per share for the year2007 and its corresponding figure for 2006.