shares question

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:25AM in AAT student discussion
hello

ive done a shares question, i just need someone to check my answer:

heres the question:-

On 1st Novemember 2005, chatford ltd sold 11,550 shares in ridgeway ltd for £69,300. Shares been acquired as follows:

Aug 1990/No Of Shares 20,000/Cost - £40,000
April 1993 Bonus/1 for 20
July 2000 rights/1for 10/cost - £7,350


Captial gains indexation figures
Aug 1990 to April 1993 - 0.098
Aug 1990 to July 2000 - 0.331
July 2000 to November 2005 - 0.115

This is what i get

no of shares left after disposal - 11,600
cost after disposal - £23,777
indexed value after disposal - £38,209

Chargeable Gain - £31,295.

If somebody could check this for me and if its wrong could someone help me where ive gone wrong as im finding this a real struggle.

Many Thanks

Steven.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:shares question

    Hi Steven

    I will answer your question this evening as im currently working but a quick look suggests that your no. of shares after disposal is wrong... my workings being:-

    start with = 20,000
    bonus share 20,000/20 = 1,000
    total = 21,000

    rights issue 21,000/10 = 2,100
    total = 23,100

    sale = (11,550)

    total left = 11,550

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:shares question

    Sorry in the delay... you got my brains working :)

    This is what I get:-

    No of shares left after disposal = 11,550
    Cost after disposal = £23,675
    Indexed value after disposal = £33,779

    Chargeable Gain = £35,521

    This is my workings:-

    http://smg.photobucket.com/albums/v236/dcoak/?action=view&current=sharecomp.jpg

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:shares question

    hello

    why do u only index it after bonus issue, i thought it was done after every transaction and why dont u use the indexation figures for april 1993, uve used up to july 2000

    many thanks

    ste
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:shares question

    Ok, well my logic is that with a bonus issue there is no monetary value so nothing for that transaction to be indexed against :? (although you wouldn't have a bonus issue with no previous shares :? ) Maybe someone else could clarify that for me?

    Indexation is to extract the profit of a future sale i.e to reduce the chargable gain.

    I have used the indexation factors upto July 2000 as that is the point when the shares were sold. Notice is goes beyond the personal ruling of April 1998. Companies are allowed indexation up until the point of sale.

    If you had used any other indexation factors you wouldn't have got the full indexation.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:shares question

    Hi,

    I did this question and got the same answer as Dean.

    Bonus shares are treated as if they were obtained at the same time as the original shares that have led to the bonus issue. so effectively you have 21000 shares issued in Aug 1990 for £40000, not 20000 shares.

    miny

Categories

Privacy Policy