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Hi. I am unable to arrive at the correct answer indicated in the CBE mock exam. Kindly assist.
As at 1 July 2000 the following was the balance for given accounts:
Share Capital (300,000 ordinary shares of 25c each) – $75,000
Share Premium – $200,000
In the year ended 30 June 2001 the following took place:
a. On 1 Jan 2001 a rights issue of 1 share for every 5 held at $1.20 per share was made.
b. On 1 Apr a bonus issue of 1 share for every 3 in issue at that time was made using the share premium account to do so.What are the current balances on the company’s share capital and share premium accounts as at 30 June 2001.
The rights issue was 60,000 shares. The share capital will increase by 15,000 to 90,000, and the share premium will increase by 57,000 to 257,000.
There are now 360,000 shares in issue.The bonus issue is of 1/3 x 360,000 = 120,000 shares.
The share capital will increase by 30,000 to 120,000; the share premium will decrease by 20,000 to 227,000
The free lecture on rights issues and bonus issues will help you.
Hello Sir Moffat,
Kindly assist with this question.
A company has the following extract from a statement of financial position.
20X7 20X6
$’000. $’000
Share capital. 2000. 1000
Share premium. 500. –
Loan stock. 750. 1000
If there had been a bonus issue of 500,000 shares of $1 each during the year, what is the cash flow from financing activities for the year?
A $1,250 inflow
B $750 inflow
C $750 outflow
D $1,250 outflow
The answer given from BPP was C and mine is D.
Ordinary share $1000+$500( bonus)
Share premium $500-$500(bonus)
Total $1500
Cash flow from financing activities
Proceed from issuing shares. (1500)
Loan payment. 250Please shed more light on this. Thanks
If you have copied the question correctly, then the answer is A !
The bonus issue itself is not relevant – there is no cash flow.
Share holders funds in total increased from 1,000 to 2,500 – so a cash inflow of 1,500.
Loan repayment of 250 – so a cash outflow of 250
So a net cash inflow of 1,250
Thank you for your prompt response.
Yes, the question is correct, I double checked it and I agree with your answer because it is inflow not outflow as I have chosen, however in the test calculation, it subtract the 500 bonus from the share premium and no changes on the ordinary shares which I believe was wrong.
I really appreciate your clarification, I will stick with that. Thanks a lot.
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