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Understand the Net Asset Method.

Accounting

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Answers

2 parts
a

275\text{275}

b

2.75\text{2.75}

Step-by-step solution

4 steps

Step 1: Understand the Net Asset Method.
The net asset method values a company based on its net assets, which is equivalent to its total equity.

Part a· 2 steps

Estimate the total value of the company using the net asset method.

  1. Identify the components of Total Equity from the provided table.

    The table lists the following equity components:

    • Ordinary shares of 50 kobo each: 50
    • Revaluation reserve: 80
    • Retained profits: 145
  2. Calculate the Total Equity.

    The total value of the company using the net asset method is equal to its Total Equity.

    Total Equity=Ordinary shares+Revaluation reserve+Retained profits\text{Total Equity} = \text{Ordinary shares} + \text{Revaluation reserve} + \text{Retained profits} Total Equity=50+80+145=275\text{Total Equity} = 50 + 80 + 145 = 275

    The table also directly states "Total equity: 275".

    The total value of the company using the net asset method is 275\boxed{\text{275}}.

Part b

2.75\text{2.75}

Estimate the value of each share of XYZ Limited.

  1. Determine the number of ordinary shares.

    The ordinary shares have a nominal value of 50 kobo each.
    The total nominal value of ordinary shares is given as 50.
    Since 1 kobo = N0.01, then 50 kobo = N0.50.

    Number of ordinary shares=Total nominal value of ordinary sharesNominal value per share\text{Number of ordinary shares} = \frac{\text{Total nominal value of ordinary shares}}{\text{Nominal value per share}} Number of ordinary shares=500.50=100 shares\text{Number of ordinary shares} = \frac{50}{0.50} = 100 \text{ shares}
  2. Calculate the value of each share.

    The value of each share is calculated by dividing the Total Equity by the Number of ordinary shares.

    Value per share=Total EquityNumber of ordinary shares\text{Value per share} = \frac{\text{Total Equity}}{\text{Number of ordinary shares}} Value per share=275100=2.75\text{Value per share} = \frac{275}{100} = 2.75

    The value of each share of XYZ Limited is 2.75\boxed{\text{2.75}}.

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