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CIMAPRA19-F03-1 Exam - Topic 4 Question 42 Discussion

A company is planning a share repurchase programme with the following details:* Repurchased shares will beimmediatelycancelled.* The shares will be purchased at a premium to the market share price.The current market share price is greater than the nominal value of the shares.Which of the following statements about the impact of the share repurchase programme on the company's financial statements is correct?
B) The share capital figure would reduce by the nominal value of the shares purchased.
A) The premium to the nominal value would be charged to retained earnings.
C) The total value of the equity in its Statement of Financial Position would remain unchanged.
D) The premium to the market value would be charged to the Income Statement.

CIMAPRA19-F03-1 Exam - Topic 4 Question 42 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 42
Topic #: 4
[All CIMAPRA19-F03-1 Questions]

A company is planning a share repurchase programme with the following details:

* Repurchased shares will beimmediatelycancelled.

* The shares will be purchased at a premium to the market share price.

The current market share price is greater than the nominal value of the shares.

Which of the following statements about the impact of the share repurchase programme on the company's financial statements is correct?

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Suggested Answer: B

by Iluminada at May 10, 2022, 01:31 AM

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Therese
10 months ago
Shares will be cancelled after repurchase, just FYI.
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Tatum
10 months ago
Really? Charging the premium to the Income Statement seems off.
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Annabelle
11 months ago
No way the total equity stays the same!
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Rochell
11 months ago
I think the share capital will drop by the nominal value.
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Venita
11 months ago
The premium goes to retained earnings, right?
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Vi
11 months ago
Hmm, I'm a bit unsure about this one. I know software allocations are important, but I'm not sure of the exact process when the hardware is retired. I'll have to review my notes to see if I can figure out the right answer.
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Fanny
11 months ago
This looks straightforward. I'd start by defining the organization's objectives and then prioritize their initiatives to ensure the Salesforce implementation aligns with their goals.
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Suzi
11 months ago
I'm not entirely sure about the calculations, but I remember something about fixed and variable costs. Maybe it's better to choose option A since 5,000 seems like a dividing line for profit?
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