Corrie Ltd issues 40,000 ordinary shares with a nominal value of 25p each at a price of £1.40 per share, fully paid in cash. What amount must be credited to the share premium account?

Correct answer: C) £46,000

Explanation

Share premium is the excess of the issue price over nominal value (s610 Companies Act 2006). Premium per share = £1.40 − £0.25 = £1.15. Total = 40,000 × £1.15 = £46,000. Check: share capital £10,000 (40,000 × £0.25) + share premium £46,000 = £56,000 cash received. £56,000 is the total cash raised, £10,000 is the nominal value credited to share capital, and £16,000 wrongly treats the nominal value as £1 (40,000 × £0.40).