Right issue and Bonus Issue......explain your answers also

Qqueeenshana14y ago

At 1 June 2009, Jevan Co’s capital structure was as follows:
$
Ordinary share capital (1,000,000 shares of 50c each) 500,000
Share premium account 400,000

In July 2009 Jevan Co made a rights issue of 1 share for every 4 held at $1 per share. This was fully taken up.

In October 2009 Jevan Co made a bonus issue of 1 share for every 5 held, using the share premium account to finance the issue. All shares in issue qualified for the bonus issue.

What is the company’s capital structure at 31 May 2010?
Ordinary share capital Share premium account
$ $
A 625,000 525,000
B 750,000 650,000
C 750,000 400,000
D 1,000,000 400,000

NNajiya14y ago#1

1 june 2009
OSC (1,000,000sh @ 50c) = $500,000
S.P $400,000

July 2009
Rights Issue- 1 for 4 @ $1
(1,000,000/4)*1= 250,000 shares
Entry:
Dr. Cash/Bank (250,000*$1) $250,000
Cr. OSC (250,000@50c) $125,000
Cr. S.P $125,000

Total number of ordinary shares = 1,000,000+250,000 = 1,250,000shares

October 2009
Bonus Issue - 1 for 5
(1,250,000/5)*1 = 250,000 shares
Entry:
Dr. S.P $125,000
Cr. OSC (250,000*50c) $125,000

31 May
OSC = $500,000 + $125,000 + $125,000 = 750,000
S.P = $400,000 + $125,000 - $125,000 = 400,000

Answer is C.

Qqueeenshana14y ago#2

Thank u so much, i understand now :)

Jjonie9014y ago#3

thank you so so much