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Dear Sir,
I can’t understand the answer of this part of question 3 as I am posting:Investments at fair value through profit and loss at 31 March, 2008 12,700
The investments at fair value through profit and loss are held in a fund whose value changes directly in proportion to a specified market
index. At 1 April 2008 the relevant index was 1,200 and at 31 March 2009 it was 1,296How it is calculated? Is it calculated same like we used to do in F6 like computing and deducting indexation allowance?
As the investment is linked to the market index price , the investment will increase/decrease proportionally to the market index.
In the above case (as you have put the question) the answer would be as follows:
Change (1296 – 1200) = 96
————————————-—————— = 0.08
Original (1200) = 12000.08 x 12,700 = 1,016 And that’s your increase.
Or to calculate in one easy step the total value,
1296
—— = 1.08
1200And to get your total value at the end it’s 1.08 x 12,700 = 13,716
I believe I am correct however I shall let one of the tutors correct me!!
Hi Hamza
Sadly, there is a misprint that escaped my attention on proof-reading. The figure of 12,700 should of course read 12,500
There’s been an 8% increase in the index and 8% x 12,500 gives us an increase in the value of the investments of 1,000
Sorry about that – it’s scheduled for correction during this coming close season
Thank you sir and thank you anuj, I tried the same trick as anuj did but answer was constantly resulting wrong, glad we did correctly but it was a little bit of error in Notes 🙂 …….. and yeah one more thing, when computing correct amount of tax in statement of CashFows, if there is a tax refund (Tax Asset) we will recieve this year so do we credit it in tax account? not debit it right?
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