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Hi sir for September 2016 Exam, question 32, part (a) , Observation (4) , which states
” I note that our share price is now $2·30, how does this compare with our share price immediately before we bought Tamsin Co?”
In the answer key, it is given as “The increase in share capital is 6 million shares, the increase in the share premium is $6million, thus the total proceeds for the 6 million shares was $12million giving a share price of $2·00 at the date of acquisition of Tamsin Co. The current price of $2·30 presumably reflects the market’s favourable view of Gregory Co’s current and future performance.
I understand that the increase in share capital is 6 million shares but i don’t understand why there is an increase in the share premium of $6million. Could you explain the calculations to me sir.
I believe that this line from the question should answer it!
‘Other component of equity (share premium) 6,000 zero’
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