ACCA Applied Knowledge · Financial Accounting · Statement of financial position
Zenith Co has 2,000,000 equity shares of $1 each in issue. It makes a rights issue of 1 new share for every 4 held at $1.60 per share, and all rights are taken up. What is the increase in the share premium account?
The share premium increases by $300,000. The rights issue creates 500,000 new shares, and each is issued at $0.60 above its $1 nominal value. The nominal value goes to share capital, and only the excess over nominal value is credited to share premium.
- A$300,000Correct
- B$500,000
- C$800,000
- D$1,000,000
Explanation
New shares = 2,000,000 / 4 = 500,000. Premium per share = $1.60 - $1.00 = $0.60. Share premium = 500,000 x 0.60 = $300,000. The figure of $800,000 is total cash raised, which wrongly includes the nominal value.
Did you get it right without looking?
One question tells you little. A timed set on Statement of financial position shows your real accuracy, how long you take and where you lose marks.
More Statement of financial position questions
- Tarn Co purchased a delivery van for $24,000 on 1 April Year 1. Company policy is to depreciate at 25% per year on the reducing balance basi…
- On 1 July, Lowe Co paid $12,000 for insurance covering the 12 months to 30 June of the following year. The year end is 31 December. Which st…
- Under IAS 1, which of the following must be classified as a current asset in a company's statement of financial position?
- Kiwi Co issued 500,000 $1 loan notes on 1 January 20X1 at par. The coupon rate is 5% with interest paid on 31 December each year. Kiwi's yea…
- In preparing a statement of financial position from a trial balance, which of the following balances would be classified as a current liabil…
- At 31 December, Darwin Co has a trade receivables ledger balance of $80,000. It has decided to write off a debt of $2,000 as irrecoverable a…