ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)
Zeta Co had share capital of $200,000 and share premium of $50,000 at 1 January. At 31 December, share capital was $260,000 and share premium was $80,000. The increase arose solely from a cash issue of new shares. What is the cash inflow from the share issue to be shown in financing activities?
The cash inflow is $90,000. A cash share issue increases both share capital by $60,000 and share premium by $30,000, and the total of these movements equals the cash received. Counting only the nominal value increase would understate the inflow.
- A$60,000
- B$30,000
- C$110,000
- D$90,000Correct
Explanation
Cash raised = increase in share capital (260,000 - 200,000 = 60,000) plus increase in share premium (80,000 - 50,000 = 30,000) = $90,000. Using only share capital gives $60,000, which ignores the premium.
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