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A company’s share capital consists 150000 ordinary shares $0.50 each.
It makes a rights issue of 1 ordinary share for every 3 already held at $1.20 each
It then makes bonus issue of 1 share for every 5 held.Which amount will be shown in Balance share capital?
A. $120000 B. $145000 C. $155000 D.$165000
I think the answer is A. $120 000
As the initial share capital is $75 000 ($0.5 X 150000)
after the right issue of 1 ordinary share for every 3 already held, i.e 50000 shares at $1.20. This will increase the share capital by $25 000 (50000 X $0.5) and share premium by $35000 (50000X$0.7($1.20-$0.5))
after the bonus issue of 1 share for every 5 held,i.e 40000 at $0.50. This will further increase the share capital by $20000
When adding,we get the Balance share capital as $ 120 000 ($75000+$25000+$20000)
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