- June 5, 2021 at 1:31 pm #623283
Can anyone help on how we got to the answer in the question below.
Promulgate’s trial balance as at 31 December, 2015 showed credit amounts of $500,000,000 and $80,000,000 against the $.50c equity shares and the share premium account respectively. On 1 September, 2015 Promulgate had correctly accounted for a fully subscribed 1 for 4 rights issue at an exercise price of $1.20 each
Promulgate had paid two dividends in the year. The first dividend payment of 4 cents per share was in March and the second dividend payment of 2.5 cents per share was paid in November
What was the total dividend payment made by Promulgate during the year ended 31 December,2015June 6, 2021 at 7:51 am #623357barbjohnMember
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Before the rights issue there were 800 million shares in issue ($400 million worth)
After the 1 for 4 rights issue, there were 1,000 million shares in issue ($500 million worth)
800 million * 4 cents = $32 million and
1,000 million * 2.5 cents = $25 million
So total dividend is $57 million
Is that right?June 6, 2021 at 12:22 pm #623419
Sorry but answer is $28,500,000June 7, 2021 at 10:29 am #623616
Sorry can you please tell me how do you come to $400 million figure?
Thank youJune 8, 2021 at 11:13 am #623875thapa7Member
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mine calculation also shows 57million
how was it 28500000?June 9, 2021 at 7:21 am #624075barbjohnMember
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It’s $57 millithe on because Destiny, in the opening post, has told us that the share nominal value is 50 cents
Here’s an extract from the internet about the question Promulgate:
‘Promulgate’s trial balance as at 31 December 2015 showed credit amounts of £500,000,000 and $80,000,000 against the $1 equity shares and the share premium account respectively’
And that’s why my answer is double the apparent printed solution … because (following Destiny’s misleading post) I have calculated the number of shares to be double the actual number
Destiny, you ask ‘Sorry can you please tell me how do you come to $400 million figure?’
The question tells us that the value of share capital AFTER the rights issue is $500 million and that the rights issue was on the basis of 1 for 4
Therefore, there must have been $400 million worth of shares BEFORE the rights issue.
Then a 1 for 4 would involve the issue of a further $400 * 1/4 value of shares and so, AFTER the rights issue there would now be $500 millionJune 9, 2021 at 11:00 am #624123
Thank you so much.
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