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This is question from June 2014
Q2
On 1 August 2013, Xtol made a fully subscribed rights issue of equity share capital based on two new shares at
60 cents each for every five shares held. The market price of Xtol’s shares before the issue was $1·02 each. The
issue has been fully recorded in the trial balance figures.
Equity shares of 25 cents each (note (iii)) 56,000000
Share premium 25,000000Please help me calculate the changes in equity as I don’t know. Thank you
If there was a 2 for 5 issue, that means that the closing figures represent 7 (because if we started with 5 and received a 2 for 5 rights issue, that means we would finish with 7 as per the trial balance
Applying this 5 + 2 = 7 formula to the closing position of share capital, we must have started with 40,000,000 and received a 2 for 5 (so received 40/5 * 2 = 16) 16,000,000 leaving us with 56,000,000 at the year end
These 16,000,000 shares I assume is the $ value, so in fact the NUMBER of shares is 224,000,000 * 25 cent shares and that means that the actual NUMBER of shares issued by the rights issue was 64,000,000 added on to the opening NUMBER of shares of 160,000,000
So if 64,000,000 shares were issued for $0.60 each that represents a premium on issue of 35 cents and 64,000,000 * 35 cents = 22,400,000
But the closing share premium balance as per the trial balance is 25,000,000 so the opening figure before accounting for the premium on the rights issue must have been 2,600,000
Is that better for you?
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