ACCA FA · Chapter 9 · Question 2 of 10
A company had 400,000 ordinary shares of $1 each and a share premium account of $150,000. It made a 1 for 4 bonus issue, using the share premium account. It then made a 1 for 5 rights issue at $1.50 per share, which was fully taken up. What are the balances on the share capital and share premium accounts after these issues?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Share capital $600,000; Share premium $100,000
Explanation
Bonus issue: 400,000 / 4 = 100,000 shares, so share capital becomes $500,000 and share premium falls to $150,000 - $100,000 = $50,000. Rights issue: 500,000 / 5 = 100,000 shares at $1.50, adding $100,000 to share capital and $50,000 to share premium. Final balances: share capital $600,000; share premium $50,000 + $50,000 = $100,000. Basing the rights issue on the original 400,000 shares gives $580,000 and $90,000.
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