Chapter 16

Market Value of Share

= (Highest Quoted price+Lowest quoted price)/2

Matching Rules => Allowable Cost

1. Same day acquisition
2. Following 30 days acquisition (FIFO basis)
3. Share Pool

Example 2

Disposal Share = 4000 shares

1. 500 shares
2. 400 shares
3. 3100 shares

1. Same day = 500 shares

Sale Proceed (4.1 x 500shares) 2050 4.1
(-) Cost -2000
Gain 50 Net Gain on Sale
= 50 -40 +4296
2. Following 30 days = 400 shares 4306
Sale Proceed 1640
(-) Cost -1680
Loss -40

3. Share Pool = 3100 shares

Sale Proceed 12710
(-) Cost -8414
Gain 4296

Working
Share Pool
No of Share Cost of Share
1 July 1998-Acquire 1000 2000
11 April 2003 - Acquire 2500 7500
3500 9500
17 July 2019 - Sold -3100 -8414 =9500/3500*3100
Balance 400 1086

Example 3

3. Share Pool (Oct 2019)

Sale proceed 6000
(-) Cost -3833
Gain 2167

Working
Share Pool
No of Share Cost of Share
1 Oct 1999-Acquire 10000 15000
1 Feb 2012- Right issue 5000 13750 (5000shares x 2.75)
15000 28750
Oct 2019 - Sold -2000 -3833 =28750/15000 x 2000share
Balance 13000 24917

Example 4 1 share => 2 Oshare

1 Pshare
Original => 3000 shares 6000 Ordinary share Part disposal => Cost allocated => Market Va
3000 Preference share

Reorganisation Market Value £ Cost

Original 3000 shares 6000 O share 6000 x 2 12000 10600 = 13250*12000/15000
3000 P share 3000 x 1 3000 2650 = 13250*3000/15000
15000 13250

Example 5 5 share => 2 Oshare

2 Cash
P pls's O share = 50000 - 20000 Ordinary share
Cost = 2.1*50000=105000 - £20000

Take over Market Value £ Cost

P pls's O share = 50000 20000 O share 20000 x £6 120000 90000 =105000*120000/140
Cash £20000 20000 15000 =105000*20000/1400
140000 105000

For Cash received

Sale Proceed 20000
(-) Cost -15000
Gain 5000

base cost of the ordinary shares in L plc = 90000

per share
 2 share --- 1 Share
10000 share ---- ? =10000*1/2

allocated => Market Value as a base

= 13250*12000/15000
= 13250*3000/15000

=105000*120000/140000
=105000*20000/140000