F6 Takeovers - BPP Text
anniebabe
Registered Posts: 590 Epic contributor 🐘
Hi Guys,
Just working through the F6 Text Bpp FA13 Page 307 Reorganisation and Takeovers
J Ltd acquired 20,000 shares in G Ltd in August 1990 (RPI 128.1) at a cost of £40,000. It acquired a further 5,000 shares in December 2006 (RPI 202.7) at a cost of £30,000.
In September 2013, G Ltd was taken over by K Plc and J Ltd received one ordinary share and two preference shares in K Plc for each one share held in G Ltd. Immediately following the takeover, the ordinary shares in K Plc were worth £4 per share and the preference shares in K Plc were worth £1 per share.
(a) Show the cost and indexed cost of the ordinary shares and the preference shares in Kplc.
(b) Calculate the gain arising if J sells 10,000 ordinary shares in K plc for £42000 in Feb 14 RPI 255.3
Book Answer
Share Pool Shares Cost Index Cost
8.90 Aquisition 20,000 £40,000 £40,000
12.06 Index rise
202.7-128.1 / 128.1 x£40000 £23,294
Aquisition 5000 £30,000 £30,000
25000 £70,000 £93,294
apportionment of cost to K plc shares
Shares MV Cost Indexed Cost
Ords x1 25,000 £100,000 £46667 £62196
Prefs x2 50,000 £ 50,000 £23,333 £ 31,098
75,000 £150,000 £70,000 £93294
Could someone explain where they get the above cost in green font £46667 and £233333
I thought i would just divide cost 70,000 by 75000 shares - 93p/share and then multiply by share no. - or is it something to do with the type of share??? stuck, brains gone numb, please help ty. working through this on my own.
Just working through the F6 Text Bpp FA13 Page 307 Reorganisation and Takeovers
J Ltd acquired 20,000 shares in G Ltd in August 1990 (RPI 128.1) at a cost of £40,000. It acquired a further 5,000 shares in December 2006 (RPI 202.7) at a cost of £30,000.
In September 2013, G Ltd was taken over by K Plc and J Ltd received one ordinary share and two preference shares in K Plc for each one share held in G Ltd. Immediately following the takeover, the ordinary shares in K Plc were worth £4 per share and the preference shares in K Plc were worth £1 per share.
(a) Show the cost and indexed cost of the ordinary shares and the preference shares in Kplc.
(b) Calculate the gain arising if J sells 10,000 ordinary shares in K plc for £42000 in Feb 14 RPI 255.3
Book Answer
Share Pool Shares Cost Index Cost
8.90 Aquisition 20,000 £40,000 £40,000
12.06 Index rise
202.7-128.1 / 128.1 x£40000 £23,294
Aquisition 5000 £30,000 £30,000
25000 £70,000 £93,294
apportionment of cost to K plc shares
Shares MV Cost Indexed Cost
Ords x1 25,000 £100,000 £46667 £62196
Prefs x2 50,000 £ 50,000 £23,333 £ 31,098
75,000 £150,000 £70,000 £93294
Could someone explain where they get the above cost in green font £46667 and £233333
I thought i would just divide cost 70,000 by 75000 shares - 93p/share and then multiply by share no. - or is it something to do with the type of share??? stuck, brains gone numb, please help ty. working through this on my own.
0
Comments
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70000*100/150= £46667
70000*50/150= £23333
It is apportioned based on the cost.
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Thank you - hopefully - I will be ok with this now. ty again. 0
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No problem, to be honest I would have stuck with that one given exam situations! I'm awaiting my F6 results at the moment so fingers crossed, and good luck!0
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Hope you did well, I was too late starting the syllabus to sit the exam in June.0
