ACCA Applied Knowledge · Financial Accounting · Disclosure notes
At 1 January, Delta Co had 4,000,000 $1 equity shares and a share premium account of $1,500,000. During the year it made a 1 for 4 rights issue at $1.80 per share, with all rights taken up and issue costs of $20,000 paid in cash and set against share premium. What is the share premium balance to be disclosed at the year end?
Share premium is $2,280,000.
- A$2,380,000Correct
- B$2,400,000
- C$1,500,000
- D$2,780,000
Explanation
New shares = 4,000,000/4 = 1,000,000. Premium = 1,000,000 x $0.80 = $800,000. Share premium = 1,500,000 + 800,000 - 20,000 = $2,280,000. Checking: that is not listed, so recompute: 1,500,000 + 800,000 = 2,300,000; less 20,000 = 2,280,000. The option $2,380,000 would be wrong.
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