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BPP Revision Kit Ques 296 Xtol Co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › BPP Revision Kit Ques 296 Xtol Co

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by P2-D2.
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  • Author
    Posts
  • September 15, 2018 at 9:09 am #474631
    steven311
    Participant
    • Topics: 6
    • Replies: 0
    • ☆

    Working 5-Dividend Paid

    May I know why have to “X 5/7” for before right issue?

    Please explain how the 5/7 comes from.

    How about “after” right issue too? Why there is no 2/7 for after right issue.

    Thanks

    September 15, 2018 at 9:17 pm #474693
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Hi,

    The equity share figure in the TB of $56,000 is the figure after the recording of the two for five rights issue. So when working out the total dividend of 2c per share that occurs after the rights issue we just multiply the number of shares in issue ($56,000 / $0.25 (par) = 224,000) by the dividend per share ($0.02).

    When calculating the total dividend of 4c per share that took place before the rights issue took place then we don’t know the number of shares in issue. Given that there were 224,000 in issue after the rights issue then we need to work backwards to get the number in issue after.

    Before the issue we had 5 shares and after the issue we had 7 (5 + 2 new), so we adjust by 5/7.

    Thanks

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