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Capital Gains – Shares : 1 for 2 rights issue

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Capital Gains – Shares : 1 for 2 rights issue

  • This topic has 2 replies, 3 voices, and was last updated 11 years ago by Tax Tutor.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • May 28, 2014 at 10:18 pm #171552
    Lee Taylor
    Participant
    • Topics: 25
    • Replies: 18
    • ☆

    Good evenining,

    i am having difficulty in calculating the following Question:

    3,500 shares in ABC plc were sold for 9,800. Jay had purchased ABC plc shares at the following times;

    May 2008 – 1,000 shares costing 1,600 GBP
    Aug 2009 2,000 shares costing 3,600 GBP
    “MAY 2010 – 1 for 2 RIGHTS ISSUE TAKEN UP, COSTING 2.20 GBP PER SHARE”

    how can i calculate the last purchase in may 2010?

    thanks

    Lee

    May 29, 2014 at 12:11 pm #171629
    AJS90
    Member
    • Topics: 2
    • Replies: 12
    • ☆

    I’m not a tutor but I’ve seen your question so thought I’d jump in.
    A 1 for 2 rights issue means that a shareholder has a right to buy, at a discounted price, 1 additional share for every 2 that they currently own.
    In your example the shareholder owns 3000 shares (May + August purchases) so they are able to buy 1500 shares at £2.20. So the total cost of the purchase is 1500 x £2.20 = £3300.
    Hope this helps and good luck in the exam!

    May 29, 2014 at 3:04 pm #171665
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Yes the rights issue is just another purchase computed as above to be added into the share pool

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