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Hello sir
How do we calculate rights issue?
Do we add share premium and share capital together and then calculate rights issue based on thr number of shares heldIt is based on the number of shares in the company (which has nothing to do with the share premium account).
Do watch my free lectures on Limited Companies where rights issues are explained in full.
Share capital 1000000shares of 50c each – $500000
Share premium account – $400000
In the year ended 30 june 2025 the company made the following share issues :
1 January 2025 :
A bonus issue of one share for every 4in issue at that date,using the share premium account.
1april 2025
A rights issue of one share for every ten in issue at that date at $1.50 per share
What will be the balance of share capital and share premium?I have understood how to calculate the share capital but i dont understand how do we get share premium of 400000
You have obviously not watched my free lectures as I said to do in my previous reply.
You cannot expect me to type out all of my lectures here!! 🙂The bonus issue is of 250,000 shares, and therefore the share premium account will reduce by 250,000 x $0.50 = $125,000.
The rights issue is of 1/10 x (1,000,000 + 250,000) = 125,000 shares. Therefore the share premium account will increase by 125,000 x $1 = $125,000.
Therefore the balance on the share premium account will end up as 400,000 – 125,000 + 125,000 = 400,000.
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