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Example 1 (I know how to do this question)
Question: Big Boss Co issues 150,000 25c ordinary shares at par value.
Required:
Show the double entry entry journal to record the share issue.
Answer:
Dr Bank $37500
Cr Share Capital $37500
Example 2 (This is the question that I am stuck on)
Question: Big Boss Co issues a further 50,000 ordinary shares at $1.25 per share.
Required:
Show the double entry journal to record the share issue.
Answer:
Dr Bank $62500
Cr Share Capital $12500
Cr Share Premium $50000
I understand that one Debits Bank with $62500
but why does one Cr Share Capital with $12500 and Cr Share Premium with $50000.
Should it be Cr Share Capital with $50000 and Cr Share Premium with $12500?
I don’t understand the logic behind the answer for Example two.
Can someone please explain to me
Thank you.
Jegan
The shares have a nominal/pas value of 25c. Therefore if 50,000 shares are issued then share capital is credited with 50,000 x 0.25 = $12,500. The extra $1 per share is credited to share premium.
I suggest you watch my free lectures on this. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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