- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
Another question has been taken from Bpp
Trial Balance at 31 March 20X2
Suspense account-13500(credit side)
Equity shares of 50 cents each -45000The suspense account represents the corresponding credit cash received for a fully subscribed rights issue of equity shares made on 1 January 20X2. The terms of the share issue were on new share for every five held at a price of 75 cents each. The price of the company’s equity shares immediately before the issue was $1.20 each
Answer
shares issued 13500/0,75=18000
Sc(18000*0,50)-9000
Sp(18000*0,25)-4500My question is that here is 13500 is the right issue value?
Such as 13500/0.75=18000-number of right issue shares
18000*0.75=13500-value of right issue sharesDid i get right?
Yes, the issue here is that the overpaid accountant hasn’t any idea how to record the credit side of a rights issue of shares
That credit entry has been taken to a suspense account (the debit entry is to Cash – he couldn’t make much of a mess of that debit!)
We know that $13,500 sits in the Suspense Account
And we know that that is the proceeds of shares issued as rights at 75 cents each
If we had issued 10,000 shares at 75 cents each, proceeds would have been $7,500
So to arrive at $13,500 proceeds we must have issued !8,000 shares
I believe that that is the same as you have worked out so, yes, you got it right!
- The topic ‘Rights issue’ is closed to new replies.