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capital structure and finance costs

This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.

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June 27, 2019 at 11:21 am #521410
seolinmin
Member
- Topics: 9
- Replies: 3
Hi, John.
A company made an issue for cash of 1,000,000 50c shares at a premium of 30c per share. Which one of the following journal entries correctly records the issue?
The answer is,
B.
Debit
Credit
$
$
Bank
800,000
Share capital
500,000
Share premium
300,000
But my answer is that Dr. bank $1,600,000, Cr Share capital $1,000,000 Share Premium $ 600,000(=30c * 20,000 shares)
I got number of shares = 1,000,000/50c = 20,000 shares.
Which part did I understand wrong?
June 27, 2019 at 12:50 pm #521418
John Moffat
Keymaster
- Topics: 57
- Replies: 54478
The question says that they issued 1,000,000 shares.
(If they had issued shares with a total nominal value of $1,000,000, then they would have issued 2,000,000 shares of 50c, but that is not what the question says 🙂 )
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