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Dear Mr. Moffat,
Can U pls help this question?
At 1 October 20X6, Ozber’s capital was structured as follows:
Ordinary shares of 25c $ 100,000
Share Premium $ 30,000On 10 January 20X7, in order to raise finance for expansion, there was a 1 for 4 rights issue at $1.15. The issue was fully taken up. This was followed by a 1 for 1o bonus issue on 1 June 20X7.
What is the balance on the share premium account after these transactions?
A. $ 17500
B. $ 21250
C. $ 107500
D. $ 120000Kaplan Exam Kit gives C as correct answer.
My main problem to this question is about finding the bonus issue existing shares.
For existing share of Rights Issue, i calculated to 400,000 shares, and proceeded on finding the rest of the calculations in normal way. The book gave existing bonus issue shares of 500,000. I’m confused of the calculation in this part of the question.
Pls help me
The started with 400,000 shares.
So the rights issue was for 1/4 x 400,000 = 100,000 shares, which means there are then 500,000 shares.
The bonus issue is 1 for 1, so is 1/1 x 500,000 = 500,000.
The free lecture on this will help you.
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