ACCA FA · Guided practice (Show me how)
Chapter 13: Accounting for Limited Companies
Bonus and rights issues - share capital and share premium
At 31 December 2020 a company's capital structure was as follows:
Ordinary share capital (600,000 shares of 50c each) $300,000
Share premium account $200,000
During the year ended 31 December 2021 the company first made a bonus issue of 1 share for every 4 held, using the share premium account for the purpose. Later in the year it made a rights issue of 1 share for every 5 then held, at $1.50 per share, and this was taken up in full.
(a) The bonus issue of 1 for 4
Show the effect of the bonus issue made in the year ended 31 December 2021 on the number of shares, on share capital and on share premium, and the balances immediately after it.
(b) The rights issue of 1 for 5 at $1.50
Show the effect of the rights issue and the closing balances, and state how much cash the company raised during the year.
Opening this exercise…