Page 294 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 12: Valuation of Shares

(a) Only a few shares are to be sold. Notes
(b) Majority shares are to be sold.
9. In the following cases, work out the Value of Right included in the market quotations:

(a) A company has a paid up capital of ` 10,00,000 in ` 100 shares. It increases its share
capital by the creation of 5,000 new shares of ` 100 each which are offered to the
existing shareholders at ` 205 each in proportion of one new share for every two old
shares held.
The company has declared a dividend of ` 15 per share free of cost for the last year.
On the declaration of dividend and announcement of the offer of new shares, the old
shares are quoted at ` 265 Cum-Dividend Cum-Right.
(b) A company has a paid up capital of ` 5,00,000 in ` 100 shares and a General Reserve
amounting to ` 5,00,000. It increases its share capital by the creation of 5,000 new
shares and decides to capitalise ` 2,00,000 out of General Reserve by allotting
two fully paid shares of ` 100 each as bonus shares for every five shares held. On
the announcement of bonus issue, the shares of the company are quoted at ` 210
Cum-Right.
10. The capital of Nimish Ltd. is ` 2,50,000 divided into 2,500 shares of ` 100 each. On 31
December, 2005, its reserve is ` 50,000. Out of this, the company issued one bonus share
of 10 equity shares held. Find out the value of bonus shares: (i) before the issue of bonus
shares, and (ii) after the issue of bonus shares.

Answers: Self Assessment

1. True 2. True
3. False 4. True
5. False 6. False
7. No. of equity shares 8. Net Assets
9. Dividend; Earning 10. Fair Value
11. Real 12. (a) Net Assets Method
13. (a) Rate of Dividend 14. (d) More or less
15. (c) Income Method 16. (a) ` 19.80

12.9 Further Readings

Books B B Dam and H C Gautam, Corporate Accounting, Capital Publishing.
Das. K R and others, Corporate Accounting, LBS Publication.
Sehgal, Dr. A and Sehgal, Dr. D, Advanced Accounting & Corporate Accounting,
Taxman Publications.

Online links http://accountlearning.blogspot.in/2011/10/methods-of-valuation-of-shares.
html
http://www.tpa-global.com/PDF/brochures/100831_Valuation_Shares.pdf
http://220.227.161.86/22213frpubcd_research3.pdf

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