Sedona Ltd Historically Makes a Profit and Would Like to Reward

Sedona Ltd historically makes a profit and would like to reward its shareholders by declaring a bonus issue next year but is not sure what effects it may have on the company's basic and diluted EPS.As accountant to Sedona Ltd which advice do you think would best describe the effects of a bonus issue?

A)
$$\begin{array} { | l | l | } \hline \text { Basic EPS } & \text { Diluted EPS } \\\hline \text { No effect } & \text { No effect } \\\hline\end{array}$$
B)
$$\begin{array} { | l | l | } \hline \text { Basic EPS } & \text { Diluted EPS } \\\hline \text { Decrease } & \text { Decrease } \\\hline\end{array}$$
C)
$$\begin{array} { | l | l | } \hline \text { Basic EPS } & \text { Diluted EPS } \\\hline \text { Decrease } & \text { No effect } \\\hline\end{array}$$
D)
$$\begin{array} { | l | l | } \hline \text { Basic EPS } & \text { Diluted EPS } \\\hline \text { Increase } & \text { Increase } \\\hline\end{array}$$

Correct Answer:

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