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Dear Tutor,
Guidance (Sep/Dec 2019)
Guidance Co has bought back 25m share of $1 for £1.20 per share during year end 31/12/2006 for cash and cancelled the shares.
The relevant answer shown as follows:
SPE property Sharescancelled Associate Total
Net profit before tax 38 (4) 34
Sales 220 220
Assets 210 50 30 290
Equity 100 50 30 (4) 176My question is that share buyback treatment is right and should be cancelled, why the answer shows that they had been added back, it seems that original treatment is wrong.
Would you please explain it? many thanks
It’s a very confusing exam question – I struggle to work out what has been done or not done.
Learning point – if it’s not been processed – then processing it would change ratios such as return on assets
I wouldn’t spend any more time on it
Trusting you have watched my debrief
🙂
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