ACCA Applied Knowledge · Financial Accounting · Capital structure and finance costs
Ostrava Co issued 100,000 $1 ordinary shares at $1.40, incurring issue costs of $6,000 paid in cash. It had share premium of $50,000 before this issue. What is the share premium balance after the issue, applying IFRS?
The share premium balance is $84,000. The new issue creates premium of $40,000 on top of the existing $50,000, and the $6,000 issue costs are deducted from equity, here share premium, rather than expensed.
- A$84,000Correct
- B$90,000
- C$44,000
- D$134,000
Explanation
Premium on issue is 100,000 x $0.40 = $40,000. Issue costs are deducted from equity, here from share premium, giving $50,000 + $40,000 - $6,000 = $84,000. $90,000 ignores the costs, which are not expensed in profit or loss.
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