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At 30 June 2005 the capital and reserves of Meredith, a limited liability company, were :
$m
Share capital
Ordinary shares of $1 each 100
Share premium account 80During the year ended 30 June 2006, the following transactions took place:
1 September 2005 A bonus issue of one ordinary share for every two held, using the share premium account.
1 January 2006 A fully subscribed rights issue of two ordinary shares for every five held at that date, at $1.50 per share.
What would the balance on each account be at 30 June 2006?
Share Capital Share premium account
$m $m
A 210 110
B 210 60
C 240 30
D 240 80How’s the answer B sir ? I’ve got answer A
At the start of the year, share capital is $100 and share premium is $80.
First they have a bonus issue or 100/2 = 50 shares.
So share capital is $150 and share premium is $30.
They now have 150 shares.Now they have a rights issue of 2/5 x 150 = 60 shares at $1.50.
So share capital increases by $60 to $210, and share premium increases by $30 to $60.Answer B is correct. I don’t know what you did wrong 🙂
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