Share issue

This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.

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February 23, 2018 at 8:28 am #438533
miracle657
Participant
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500,000 50c shares issued at $1.50 per share in exchange for shares in X..Double entry as follows:
Dr-Trade investment in X 750,000
Cr-Share capital account 250,000
Cr-Share premium account 500,000
Sir, i didn’t understand what kind of issue it..it is similar right issue but there is no increased cash…Does it mean that we buy other entity’s (X’s) investment instead of cash?
February 23, 2018 at 8:38 am #438540
John Moffat
Keymaster
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Yes – they are buying X’s shares but instead of paying cash they are issuing new shares.

(So the entries are exactly the same as if they paid cash to buy the shares, and then received cash for the new shares issued. Since you would then be debiting and crediting cash with the same amount, the cash entries don’t appear.)
February 23, 2018 at 9:08 am #438545
miracle657
Participant
- Topics: 65
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So can we call it right issue?
February 23, 2018 at 2:34 pm #438573
John Moffat
Keymaster
- Topics: 57
- Replies: 54857
No we can’t. A rights issue is always an issue to existing shareholders of the company at a reduced price. This is a new issue of shares.
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