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Hi tutor,
Can u please help me on the question below.
At the start of the year, a company had balance on it 25 cent equity share capital account and share premium account of $560,000 and $285,000 respectively.
The company issue bonus share on the basic 1 for 4 shares already held by capitalizing part of its general reserve.
Later, the company made a new issue of share at full market price.
At the year end, there were balance on the share capital account and premium account of $960,000 and $400,000.What amount of cash received from share issue should be shown in statement of CF?
Well, I know the answer. What do you think the answer should be? tell me, and then I’ll point out your error
Working on Same question, Not Shure, if i Handled correct with the right issue:
Cashinflow 435
(560+285-960-460+140[bonusshare, no cashinflow: 560*1/4])
?Hmmm – that looks the same as mine EXCEPT!!!!! In your original post you have given me the figure of $400 as the closing balance on the share premium account yet in your last post it looks like you have shifted that amount to 460
If 460 is the correct closing balance on the premium account, then 435 IS the value of cash received.
Well done
🙂
Incidentally, you say that you’re not sure that you have correctly dealt with the rights issue – there is no rights issue! Don’t get it confused with a bonus issue – they are radically different animals
Tranks, i Mixed up 400 and 460 and right and Bonus issue, correct answer musst than be:
375
A right issue Can be a cashinflow, a Bonus issue Not.
Yeah, my answer is $375,000 too. ($960,000 + $400,000 – $560,00 – $285,000 – $140,000 bonus issue) but it’s not of the choices in MCQ. The choices are only:
a. $595,000
b. $420,000
c. $315,000
d. $455,000I captured the screen shoot of the question and the correct answer shown is $315,000?
How come???
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