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Share capital

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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November 11, 2020 at 8:22 am #594674
ketki15
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Equity shares, $1 10000
Retained earning- 1jan 20×5 25500
On 1feb 20×5, Carbon Co made a 1 for 4 rights issue at an issue price of $2.50 per share. The right issue was fully subscribed and taken up by the shareholders.
How many shares were issued?
Why does the calculation involve 10000 x 1/5?
November 11, 2020 at 10:40 am #594704
John Moffat
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For every 4 shares that the used to hold, they will have got 1 more share and therefore own 5 shares at the end of the year.
So if at the end of the year they own 10,000 shares, then 1 out of 5 of them must have been because of the rights issue.
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