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Hi,
I’ve just attempted the online MCQ questions (great tool, thanks :)) and got stuck on the following question:At the start of the year a company had balances on its 25 cent Equity Shares capital account and share premium account of $560,000 and $285,000 respectively.
During the year, the company issued bonus shares on the basis of 1 for 4 shares already held by capitalising part of its general reserve.
Later in the year, the company made a new issue of shares at full market price.
At the year end, there were balances on the share capital account and share premium account od $960,000 and $400,000.
What price were the new shares issued for and how much share premium was received on each new share?
For some reason I have a real mental block when it comes to any question with shares!!! Any help in understanding this question would be great.
Thanks,
Corinne
Hi Corinne
I believe that this is the mcq (hopefully the only one!) where there is a misprint in the option answers. The figure of $315,000 in the answers should be $375,000
Does that resolve your problem?
Hello Mike,
Can you please solve the question for me as I am unable to calculate the new issue of shares ?
We start with $560,000 worth of 25 cent shares = 2,240,000 shares
We issue a bonus of 1 for 4 financed from General Reserve, so 560,000 new shares now in issue giving a total of 2,800,000 shares in issue worth $700,000
So we must have issued $960,000 – $700,000 worth of new shares = 1,040,000 25 cent shares
When these new shares were issued the share premium moved from $285,000 to $400,000 so a premium of $115,000
Premium per share is therefore $115,000 divided by 1,040,000 shares ……. but that sounds unlikely to me but that’s how the figures you have given me work out
Is that better?
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