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hey sir, I have one more doubt
question: At 1 October 20X6, Ozber Co’s capital structure was as follows:
$
Equity shares, $0.25 100,000
Share premium 30,000
On 10 January 20X7, in order to raise finance for expansion, Ozber Co made a 1 for 4 rights
issue at $1.15. The issue was fully taken up. This was followed by a 1?for?10 bonus issue on
1 June 20X7.
What was the balance on the share premium account after these transactions?
A $17,500
B $21,250
C $107,500
D $120,000I have doubt that how did we get to know the share premium amount for bonus issue shares. just tell the explanation part
The rights issue shares and the bonus issue shares always have the same nominal value as the existing shares, so in this case it is $0.25.
Given that the rights issue was at $1.15, the premium is $0.90 per share.
As far as the bonus issue is concerned, the nominal value of $0.25 per share is subtracted from the share premium account.
This is all explained 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.
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