Couldn't understand — OpenTuition Forums

SSteven6y ago

Additional information – During the year, a bonus issue of 1 share for every 4 held (The par value of the shares outstanding is $1) at 1 January 20X9 followed by a right issue on 5 February 20X9 at $1.2 each. Share premium 230.000$. For 2019 120.000$ Share capital 200.000 $ 100.000$ To make double entries and show its capital structure following: (a) A '1 for 4' bonus issue (b)A rights issue of '1 for 5' at $1.2 following the bonus issue, assuming all rights taken up

John MoffatTutor6y ago#1

You have not said which part of the question you do not understand. Accounting for bonus issues and rights issues is explained in detail in my free lectures on limited companies. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.

SSteven6y ago#2

Couldn't understand how to calculate bonus issue and right issue

SSteven6y ago#3

Sir, could you please check it The rights issue is 1/5 x 200.000 shares = 40.000 shares. To share capital goes 40.000 x 1.2 = 48000; to share premium goes 48000 x 1.2= 57.600 There are now 248.000 shares in issue. The bonus issue is 1/4 x 248.,000 = 62.000. Share capital increases by 62000 x 1.2 = 74,400; share premium decreases by 74,400.

John MoffatTutor6y ago#4

The question as you have typed says twice that the bonus issue is first. So the bonus issue is of 1/4 x 200,000 = 50,000. The shares have a nominal/par value of $1, so share capital increases by $50,000 and the share premium falls by $50,000. There are now 250,000 shares in issue so the right issue is for 1/5 x 250,000 = 50,000 shares. Share capital increases at $1 per share, and share premium increases at $0.20 per share. (I am assuming that the share capital at the start of the year was $200,000 but it is not very clear from the way that you have typed it) Why are. you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publisher - they have answers and explanations :-) Please watch my free lectures because this is all explained in detail.