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Share premium

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Share premium

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • November 21, 2021 at 1:27 pm #641246
    Laurappp
    Participant
    • Topics: 4
    • Replies: 3
    • ☆

    Hi,

    I did BPP exam kit and it not seems clear to me how to calculate share premium.
    It’s the example 307 Paradigm.

    So they purchased shares in sub for 2 to 5 exchange.
    subs share capital is 20mil 1$ each.
    75% purchased – 15mil shares purchased.
    15/5*2 exchange = 6mil of parent shares
    2$ is market value of P shares
    so total consideration is 12mil
    share premium is 12mil less 6 mil shares*1$ per share which is 6mil.

    Initial share capital for parent is 40mil
    share premium is 6mil
    but the answer states that consolidated share capital is 46mil and 6mil share premium.
    Where did extra share capital of 6mil came from?

    Should this 2 to 5 exchange be treated as new share issue and extra 6mil shares comes from that?

    November 27, 2021 at 7:29 am #641739
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6460
    • ☆☆☆☆☆

    Hi,

    Yes, the additional $6 million to share capital is because the parent has issued its own shares as part of the acquisition. In issuing $12 million worth of shares the following entry would be recognised in the books of the parent:

    DR Investment $12 million
    CR Share capital ($1) $6 million
    CR Share premium (balancing figure ) $6 million

    Hope that clears it up for you.

    Thanks

  • Author
    Posts
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