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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- 236,000B-SC $864,000
SP $488,000C- SC $756,000
SP $236,000D- SC $756,000
SP $488,000?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).
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.
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