In: Finance
On 31 July 2018, Sipho bought 1 000 ordinary shares in ABC Ltd at a cost of R2 750. On 31 December 2018 the company made a 1 for 10 bonus issue. On 31 March 2019, Sipho sold 300 shares for R800. The chargeable gain or allowable loss arising on the disposal is:
Loss R50 |
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Gain R250 |
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Gain R50 |
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Loss R25 |
Solution:-
Cost of 1000 Ordinary Shares is R 2750.
Company made 1 for 10 bonus shares, that means 1 bonus share for 10 shares held
Hence, Bonus Shares issued to Sipho are : Shares held * 1/10
: 1000 *1/10
Bonus shares : 100 Shares
Now Sipho has total 1100 shares (i.e 1000 shares Plus 100 Bonus shares)
Cost of 1100 shares is remain R 2750 (Note : No Additional payment for 100 bonus shares)
Hence, cost of one share to Sipho : Total Cost paid for shares / Total number of shares
Cost of one share to Sipho : R 2750 /1100
Cost of one share to Sipho : R 2.50
(Calculation of Gain or Loss on Disposal of 300 shares)
Sale price of 300 shares by Sipho : R 800 (given)
Cost Price of 300 Shares by Sipho : 300*2.50 = R 750
Hence, Gain on Disposal of 300 Shares : Sale Price of 300 Shares - Cost of 300 Shares
Gain on Disposal of 300 shares : R 800 - R 750
Gain on Disposal of 300 shares : R 50
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