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Hi Sir,
Question 3 , I am not sure of the working done for the rights issue part (i).
Can you please explain how to calculate the weighted average of the shares as we are not provided with the shares at the beginning of the period.
Well, if 30,000 is AFTER a 1 for 5 rits issue, then 25,000 must have been the figure BEFORE the rights issue
Then a 1 for 5 would involve the issue of 25,000 / 5 = 5,000 new shares
Can you take it from there?
So, in the same question there is part relating to suspense account.. I didn’t understand how to account for it as I referred the solution as well but is not making sense to me. Please help…
I really wish that you had asked this at the same time!
Without me going back to the question, I seem to remember that the suspense account represented he “other” entry for te proceeds from the rights issue
5,000 shares were issued for (SAY!) $2.60 each giving a credit in suspense account of $13,000
Of that $13,000, $5,000 should be in Share Capital account and the remaining $8,000 in Share Premium account
So we now need to debit suspense account with $13,000 and credit $5,000 to share capital account and $8,000 to share premium account
If my recollection of the problem is incorrect, post again and I’ll look the question up again on my ipad
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