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Hello sir
Shares exchange has been credited in halves twice as share capital and share premium in the journals. Can you explain why haven’t they been taken share exchange as one? Also how how to treat them?
The nominal value of a share (in the exam) is typically $1
But if that share is valued at, say $2, then the issue of 100,000 shares will result in the journal entry:
Dr Cost of Control (or Investment in subsidiary (same thing)) $200,000
Cr Share Capital $100,000
Cr Share Premium $100,000This might be clearer if I were to show you the journal entry where the 100,000 shares being issued had a market value of $2.50 per share
Now the journal entry will be:
Dr Investment on Subsidiary (100,000 * $2.50) $250,000
Cr Share Capital (100,000 * $1) $100,000
Cr Share Premium (100,000 * ($2.50 – $1)) $150,000Is that better?
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