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A company has 50,000 $1 shares,each issued at $1.5. During the year company made a one for ten right issues at a price of $2.
What is the balance on the share capital and share premium at the end of the year?
A)Share capital $26,250 Share premium 53,750
B) Share capital $27,500 Share premium 52,500
C) Share Capital $55,000 Share premium 30,000
D) Share capital $80,000 Share premium 5,000
I dont get it how the answer is C? Please explain siryaqoobacca: Why on earth have you typed ‘wrong question’??
yusra97:
The company started with 50,000 shares; balance on share capital of 50,000 x $1 = $50,000; balance on share premium of 50,000 x $0.50 = $25,000.
They have a 1 for 10 rights issue at $2.
Therefore they issue 5,000 new shares for $2 each. Share capital increases by 5,000 x $1 = $5,000 to $55,000. Share premium increases by 5,000 x $1 = $5,000 to $30,000.
I do suggest that you watch my free lectures – I explain how to deal with rights issues and bonus issues in detail, with examples.
The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
I have other question which i am not able to solve.
At 1 October 2003 the equity section of the company is as follows.
Share capital $0.50 per share – 300,000
Share premium – 200,000
Retained Earnings -268
During the year the following occurred
1) Company paid dividends of 23000
2) In february 2004 there was a bonus issue of shares from share premium account that was 1 for 5
3).In july there was a new issue of 50,000 shares at a price of $1.75
4) Profit for the year are 44,000
Complete the following equity section of statement of financial position at 30 september 2004
Share capital ($0.50 per share) – 300 + 60 + 25 how 60,000? and 25000? why are we finding out these values?
share premium – 200-60+62.5 how? -60? what is this value? also 62.5?which value is this?It seems that you have not bothered to watch my free lectures despite what I wrote in my previous reply!! How can you expect to be able to answer questions if you do not study the topic first? 🙂
The $60,000 is because they have had a bonus issue of 600,000/5 = 120,000 shares at $0.50 each. The $25,000 is because they have has a new issue of 50,000 shares with a nominal value of $0.50 each.
Again the $60,000 is as I have just explained – since it was a bonus issue it is subtracted from the share premium account. The $62,500 is the premium on the new shares issued: 50,000 x $1.25 = $62,500.
You must watch the free lectures – you cannot expect me to type them all out here 🙂
no no i have watched your free lectures..but i am still struggling with these concepts. i donot get how 600,000 came? the rest i understood..is it because? share capital -300+share premium 200 + 100 comes from bonus issue? so total 600,000? right? then divide it by 600,000/ 5 =120,000
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