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Thus whenever shares are purchased or sold a reindexation of the indexed cost of the shares in the
pool is added to the indexed cost total which is recorded in a separate Indexed Cost column of the
share pool.
Once again indexation factors will be given in the question and indexation allowance is frozen at
December 2017.
Follow the answer to example 2 below to see how the share pool is constructed.
Example 2 A Ltd bought the following shares in B Ltd:
20 August 1990
1,000 shares at a cost of £5,000
16 November 1997
2,000 shares at a cost of £12,000
7 December 2023
500 shares at a cost of £5,000
A Ltd sold 3,000 shares on 10 December 2023 for £36,000
Calculate the gain arising on the disposal in December 2023. Indexation factors are as follows:
August 1990 to December 2017
1.419
August 1990 to November 1997
0.329
November 1997 to December 2017
0.820
4. Bonus issues (a)
A bonus issue increases the number of shares held with no corresponding increase in cost.
(b)
The bonus shares are simply added to the number of shares column in the pool.
(c)
Do not however index the cost of the original shares to the date of the bonus as no new cost is
incurred but remember on the next purchase or sale to index the indexed cost figure from the
date of the last indexation that took place, not the date of the bonus issue.
5. Rights issues (a)
A rights issue again increases the number of shares held, but this time there is also a cost
associated with the shares. It is therefore dealt with in the same way as any other acquisition.
(b)
The indexed cost in the pool is indexed to the date of the rights issue. The rights shares are
added to the number of shares column and the cost is then added to both the cost and
indexed cost columns in the pool.
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