ACCA Applied Knowledge · Financial Accounting · Capital structure and finance costs
Zeta Co has 1,000,000 $1 ordinary shares in issue. It makes a 1 for 4 bonus issue, funded from the share premium account, which has a balance of $400,000. What is the share premium balance after the issue?
The share premium balance is $150,000. The bonus issue creates 250,000 new $1 shares, costing $250,000, which is debited to share premium. Deducting this from the opening $400,000 leaves $150,000, while share capital rises by $250,000.
- A$150,000
- B$250,000Correct
- C$650,000
- D$0
Explanation
Bonus shares = 1,000,000 / 4 = 250,000 shares at $1 = $250,000. Debit share premium $250,000, credit share capital. Balance = 400,000 - 250,000 = $150,000. Option $250,000 is wrong because it is the amount capitalised, not the remainder.
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