ACCA FA · Chapter 9 · Question 10 of 10
For which of the following purposes may the share premium account be used?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) To pay up bonus shares issued to existing shareholders
Explanation
The share premium account is a non-distributable statutory reserve with restricted uses, a common one being to fund a bonus issue of fully paid shares. It cannot be used to pay dividends. Writing off debts is an expense in profit or loss, and buying assets uses cash, not a reserve.
More Capital structure and finance costs MCQs
- Q2A 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…
- Q3Which of the following statements about a bonus issue of shares is correct?
- Q4On 1 April 20X5, a company issued $250,000 of 8% loan notes. Interest is paid every six months on 30 September and 31 March. What is the…
- Q5Where are dividends paid to ordinary shareholders presented in a company's financial statements?
- Q6A company has issued redeemable preference shares that must be redeemed for cash on a fixed date. How should these be classified, and how…