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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 400,000In 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 1,000,000 400,0001 june 2009
OSC (1,000,000sh @ 50c) = $500,000
S.P $400,000July 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 $125,000Total 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) $125,00031 May
OSC = $500,000 + $125,000 + $125,000 = 750,000
S.P = $400,000 + $125,000 – $125,000 = 400,000Answer is C.
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