[neelc21]

@johnmoffat said:
On 1 January they make a bonus issue of 1/4 x 1M = 250,000 shares of 50c.
Therefore share capital will increase by 250,000 x $0.50 = $125,000 and share premium will reduce by $125,000.
So they now have 1,250,000 shares in issue; the balance on share capital is $625,000 and the balance on share premium is $275,000

On 1 April they make a rights issue of 1/10 x 1,250,000 = 125,000 shares.
The share capital will increase by 125,000 x $0.50 = $62,500, and the share premium will increase by 125,000 ($1.50 – $0.50) = $125,000
So the final balance on share capital is 625,000 + 62,500 = $687,500, and the final balance on share premium is 275,000 + 125,000 = $400,000.

This is all explained in my free lectures on Limited Companies.
The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.

(In future, if you want me to answer, then ask in the Ask the Tutor Forum – this forum is for students to help each other)

Thank you Sir.

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