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share capital/share premium

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › share capital/share premium

  • This topic has 5 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • July 19, 2015 at 3:41 am #261082
    mary
    Member
    • Topics: 4
    • Replies: 5
    • ☆

    Hello Sir,

    Can i ask you to help me understand this question (home learning college)

    The share capital for a limited co. on 31.5.20X1:

    2,400,000 ordinary shares of $0.25 – $600,000
    Share premium – $500,000
    On 1st Sept 20X1 the company made a bonus issue of shares funded by the share premium account of 1 share for every 5 held.

    (MY CALCULATION= 1 / 5 x 2,400,000=480,000 SHARES (DO I MULTIPLY HERE WITH ANY MONEY VALUE AS THIS QUESTION HAS NOT STATED A PAR OR PREMIUM VALUE?)

    On 1st Jan 20X2 the company made a rights issue of 1 share for every 20 shares held at an issue price of $1. All rights were taken up.

    (MY CALCULATION – 1 /20 x 2,400,000= 120,000 x $1= $120,000
    120,000 x $0.75= $90,000 SP ACCOUNT
    120,000 x $0.25= £30,000 SC ACCOUNT
    (HERE I WOULD NOW ADD 30K TO THE SC ACCOUNT AND 90K TO THE SP ACCOUNT, BUT I STILL WOULD NOT GET ANY OF THE ANSWERS BELOW- WHERE HAVE I GONE WRONG?)

    What are the balances on the share capital and share premium accounts at 31 May 20X2?

    the options are:
    A- SC $864,000
    SP- 236,000

    B-SC $864,000
    SP $488,000

    C- SC $756,000
    SP $236,000

    D- SC $756,000
    SP $488,000?

    July 19, 2015 at 8:51 am #261090
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You really do need to watch the free lectures!

    First point: The new shares are always the same nominal value as the exiting shares, so a nominal value of 0.25. So the total of $120,000 is added to the share capital and subtracted from the share premium.

    Second question: after the bonus issue there are 2.880,000 shares in issue. So the rights issue is 1/20 x 2,880,000 = 144,000 shares (not 120,000).

    July 20, 2015 at 3:56 pm #261159
    mary
    Member
    • Topics: 4
    • Replies: 5
    • ☆

    thank you for your explanation- I will have a look at the lectures.

    July 20, 2015 at 7:54 pm #261177
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

    July 21, 2015 at 9:21 pm #261356
    mary
    Member
    • Topics: 4
    • Replies: 5
    • ☆

    Hello Sir,

    i have tried to find a the lecture which gives more of an insight to question and can’t find it. Please advise me which one it is.

    July 22, 2015 at 9:03 am #261372
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It is the lecture on Limited Companies

  • Author
    Posts
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