Q3: sep/dec 15: Flufftort — OpenTuition Forums

Mmansoor9y ago

Hi John this question is crazy and does not seem to fit at all in the syllabus. in part (a) F has to pay 10m to buy back the shares. 7.6 comes from cash, but where did the remaining cash comes from?? the RE has gone up!! at this stage (2 days before the exam) shd i spend time on it? what are the chances of such a question coming?? help!!! i have not done P2 yet and its been more than a year since i cleared f7!! regards

John MoffatTutor9y ago#1

Since the retained earnings increase by 2.4, the cash must increase by 2.4 as well (the question says that the 2016 retained earnings can be assumed to be the increase in cash). So 7.6 + 2.4 gives them the 10M. This sort of question does come up from time to time, but is only ever likely as a choice question in section b.

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