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Dear Sir,
I tried to follow the answer in the course notes but i could not figure out how the figures of 14167 and 24795 were calculated.Can you please explain it to me?
Thanks
Number of shares disposed off on the 10th of October = 2500
divided by
Total number of share (3000)
multiply by £17,000
this will give you the cost of 2500 shares (£14,167)
For indexed cost
£14,167 divided by £17,000 x £29,754 = £24,759The example shows that as at the date of disposal there are 3,000 shares in the share pool that have cost £17,000 and which have an indexed cost of £29,754. The idea of the pool is that we base the cost and the indexed cost of the shares now sold on the average cost / indexed cost of the shares acquired. Therefore as 2,500 shares are sold out of 3,000 shares in the pool we take that proportion of each of the cost and indexed cost figures:
2500/3000 x 17,000 = 14,167, and
2500/3000 x 29,754 = 24,795
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