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Hi there Sir,
I am confuse (as usual) – I notice for question June 2012 Fresco, in order to calculate the right issue, i.e. every 1 new shares for 5 held u have to do this
1/5 x 90 000 = 18 000 shares.
However in Q Dexon June 2008, 1 for 4 right issue is calculated 1/5 x 250 000 = 50 000 shares. So here it is 1+4=5 gives u 1/5. Whilst in the above question u don’t have to sum up 1+5=6, otherwise u will get wrong answer. It seems inconsistent.
Thanks!
No, it’s not at all inconsistent.
In the question Dexon, am I correct in saying that the question tells us that the share issue has been correctly recorded? So the 250,000 is the number of shares AFTER the rights issue. Therefore the number of shares in issue before the rights issue is 200,000 which, when we issue a further 1 for 4, rises to 250,000
In Fresco (am I correct again?) the rights issue has NOT YET been recorded in Fresco’s accounting records, so a 1 for 5 based on 90,000 shares results in 18,000 new shares being issued
Is that ok now?
Hi Mike, back to this Fresco question, can you help me understand again how the rights issue of $13.5m, is split into $9m for share capital and $4.5m for share premium in the SOCE.
Many thanks.“The suspense account represents the corresponding credit for cash received for a fully subscribed rights issue of equity shares made on 1 January 2012. The terms of the share issue were one new share for every five held at a price of 75 cents each”
The nominal value of each share is 50c
The new shares are issued for 75 cents each
So 50c of that 75c is the nominal value of the new shares and …
… 25c of that 75c is the share premium
$45,000 is the aggregate value of shares in issue that attract the 1 for 5 rights issue so that means that there are now 90,000 shares in issue PLUS the rights issue shares
1 for 5 rights issue based on 90,000 shares means a new issue of 18,000 shares with a nominal value of $9,000 and a premium of 18,000 x (75c – 50c) = $4,500
OK now?
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