Personal Tax sample assessment question 2.6 FA 2011

Apple89

Hey everyone, can someone please help me with the above question. I have checked the answer but I do not understand how they got it. Thanks everyone.

Jo Clark

May seem like a silly question but I'm feeling pretty silly right now! Why are you doing FA 2011 papers? Should you be studying and practicing 2012 or 2013? I will have a look at the question later tonight once I have finishedmy report I'm writing JC

Nps

Which assessment - there are 2 for 2011?

Nps

If you mean the first one....... 700 of the 800 shares sold are taken from the shares bought on the 21/7 as they were purchased within the 30 days following the sale. The remaining 100 come from the existing pool from the Mar 11 purchase. So you have a £2,100 loss on the 700 shares (17500-19600) and a £1522 (2500-978) gain on the other 100 shares giving an overall loss of 578.

Nps

If it's the second assessment, then........

You have 400 shares from Mar 98 at a total of £6000
The bonus issue gives you a total of 440 shares still at £6000
The rights issue leaves you with 495 shares at a total of £6550 (55 new shares at £10 each plus the original £6000)

Selling 300 at a total of £5700 which cost you £3969.70 (6550/495*300) means a gain of £1730.30

Jo Clark

Ahhh NPS beat me to it! :001_tongue:

Apple89

Hi Jo and NPS, sorry for the late reply but I had family over yesterday. It was the first assessment I needed help with, so thank you for your help NPS. Would it be possible for you to help with another question? I am using the BPP text and their way to working out shares is different to yours.

Their question is:

Vernon sold 4000 shares in R Ltd for 36200 on 23 February 2013. He had acquired his holding in R Ltd as follows:

14 April 1998, Purchase 6000 for £18400
29 May 203, Right issue 1 for 20 £4 each
10 March 2013 Purchase 500 for £3400.

I hope you can help with the question.

Jo, you are right i am studying FA2012, but my exam is on Thursday, so I am looking for as many practice questions as possible.

Thanks again

Nps

Hi, Not sure how the workings are different as they should be the same – unless you mean the fact that in the assessment question, they have split the two sets of shares into 2 and shown a gain/loss for both, rather than an overall gain/loss. Personally I would just do it as one overall gain/loss but I split it down for you as that’s how the answer showed it. Anyway, the question you have posted should follow the same calculations as the first assessment question. More shares are purchased within 30 days of the sale so these shares are deemed to be sold first. So the first 500 shares of those sold, were bought for £3400. That leaves 3500 shares which must have come from the share pool. 14/4/98 – 6000 shares at £18400 29/5/03 (I’m assuming ’03 rather than ’13??) – Rights issue of 1 for 20, means 300 extra shares were bought at £1200, resulting in a new total of 6300 shares which cost £19,600 overall. That means each share is now costed at £3.11 each (19600/6300) The final 3500 sold shares therefore cost £10,885 (3500*3.11). Together with the other 500 which cost £3400, you have a total cost of £14285. If these were sold at £36,200 you have a total gain of £21,915 ( I’ve used a bit of rounding so your answer may be a bit different).