ACCA Applied Knowledge · Financial Accounting · Capital structure and finance costs
Brindle Co issued 500,000 $0.50 ordinary shares at $0.80 each. Issue costs of $12,000 were paid in cash. Issue costs are to be accounted for in accordance with IFRS. Share premium before this issue was $40,000. What is the share premium balance after recording the issue and the costs?
The balance is $178,000. The new premium is 500,000 x $0.30 = $150,000, share issue costs of $12,000 are deducted from equity rather than expensed, and the opening balance of $40,000 is added: 40,000 + 150,000 - 12,000.
- A$178,000Correct
- B$150,000
- C$190,000
- D$138,000
Explanation
Premium per share is $0.30, so 500,000 x $0.30 = $150,000. Issue costs are deducted from equity (share premium), giving $150,000 - $12,000 = $138,000 for this issue. Adding the opening $40,000 gives $178,000. Expensing the costs would give $190,000.
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