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Hi Sir!
My question regarding the book value of right issue. How should we record the book value of right issue?
Example:
Current Company have 1000 shares (1$ per share) => book value is 1000$
market value of shares is 5$ per share => market value 5000$
Company issue 1 for 5 right issue with 20% discount to current share price.
Meaning we issue 200 shares more with 4$ each => raise 800$ finance.
How should we record this 800$ in our book?
I noticed most of exercise in revision kit, they record 800$ directly as book value, so meaning is equal to 800 shares with nominal value 1$ per share? or 200 shares with 4$ per shares?Thanks for your explain in advance!
This is Paper FA (was Paper F3).
In your example the new shares have a nominal value of $1 each and therefore share capital increases by $200 and share premium increases by $600.
Oh ya! i forgot we book the variance in Share premium and we calculate the book value of equity is including in Share Premium.
Thank you Sir for your helpful explanation.
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