ICAEW AF · Chapter 13 · Question 1 of 12
A company issues 200,000 ordinary shares with a nominal value of £0.50 each at a price of £1.40 per share, all paid in cash. How is the issue recorded in equity?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Share capital £100,000 and share premium £180,000
Explanation
Share capital is always recorded at nominal value: 200,000 x £0.50 = £100,000. The excess received over nominal value is credited to share premium: 200,000 x (£1.40 - £0.50) = £180,000. Cash of £280,000 is debited.
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