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hi i am a bit confused how the share prices work i have an example question if any body can explain it.
q.suppose that trulove ltd has an issued ordinary share capital of 800000 one penny shares,each issued for five pence. trulove ltd decides to make a one for four bonus issue(to issue one new gratis share for every four sharesheld)and capitalise the share premium account.
what is the amount with which share capital has been increased?
if any body can answer this and explain abit how do you sort this that woud be appreciated .thankx.If it had 800,000 1p shares issued at 5p, then share capital would show 8,000 and share premium 32,000 (total cash raised = 40,000).
A 1 for 4 bonus issue will cause 200,000 new shares to be issued at 1p and so 2,000 will be transferred from the share premium account to share capital. Bonus issues are always made at par/nominal value.
HTH
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