ACCA FA · Chapter 9 · Question 9 of 10
A company issued shares at $2.00 each several years ago. Its shares are now quoted on a stock exchange at $3.40 each. How does the increase in the market price affect the company's share capital in its statement of financial position?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) There is no effect; share capital remains at its nominal value
Explanation
Changes in the market price of a company's own shares occur between investors and are not transactions of the company. Share capital and share premium reflect the amounts received when shares were issued, so they are unaffected by subsequent movements in market value.
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