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On 31 December 2004, Alpha’s issued share capital consisted of $240,000 in $0.50 ordinary shares, all of which had been issued at a premium of 10%. On 1 January 2005 a bonus issue of 1 for 4 was made. On 1 March 2005, a new issue for cash was made at a premium of 20 cents per share. The total cash received was $42,000.
In the statement of financial position as at 31 December 2005, what is the figure for issued share capital?
A. $317,000
B. $330,000
C. $390,000
D. None of the aboveDear Tutor,
Would you mind to show and explain your workings to get the correct answer for the above question?
Thank you.
Best Regards,
KevinYou must have an answer to this in the same book in which you found the question. In future please ask about whichever part of the answer you are not clear about, rather than simply expect me to provide an answer.
Also, have you watched my free lectures on this, because I explain all of it in my lecture?
🙂They started with 480,000 shares. They had a bonus issue of 1/4 x 480,000 = 120,000 shares. So they now have 600,000 shares. They then have new issue at $0.70 per share (0.50 + 0.20), so they issued 42,000/0.70 = 60,000 shares.
So the final total is 660,000 shares. They are $0.50 shares, so the share capital is $330,000.
Do watch the lectures – they are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
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