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Company

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Company

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 18, 2021 at 12:06 pm #620932
    Priyanka19
    Participant
    • Topics: 32
    • Replies: 20
    • ☆☆

    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 held

    May 18, 2021 at 2:31 pm #620942
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    It 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.

    May 19, 2021 at 7:24 am #621006
    Priyanka19
    Participant
    • Topics: 32
    • Replies: 20
    • ☆☆

    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

    May 19, 2021 at 8:33 am #621032
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    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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