Tag: rights issue

At the 31 December 2022, the capital structure of Alex plc was as follows:

• 100,000 equity shares of 50p each  £50,000
• Share premium account  £180,000

During 2023 the company made a 1 for 2 bonus issue, using the share premium account for the purpose, and later did a rights issue for cash of another 60,000 shares at a strike price of 80p per share (30p share premium).

What is the company’s capital structure as at 13 December 2023?

Select ONE answer:

1. Equity Share Capital £130k and Share Premium Account £173k
2. Equity Share Capital £105k and Share Premium Account £173k
3. Equity Share Capital £130k and Share Premium Account £137k
4. Equity Share Capital £105k and Share Premium Account £137k

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> Share Capital is £50k + (Bonus issue 50,000 * £0.50p = £25k) + (Rights issue 60,000 * £0.50p = £30k) then Share Premium is £180k – (Bonus issue 50,000 * £0.50p = £25k) + Rights issue 60,000 * £0.30p = £18k)
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which of the following general journals correctly records a bonus issue of shares?

Select ONE answer:

1. Debit Cash at bank, Credit Share capital
2. Debit Share capital, Credit Share premium
3. Debit Share premium, Credit Share capital
4. Debit Investments, Credit Cash at bank

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct –> A bonus issue does not involve cash being exchanged but can be financed from the existing share premium account.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc issued 50,000 equity shares of 25p each at a premium of 50p per share.

The cash received was correctly recorded but the full amount was credited to the equity share capital account.

Which of the following journals corrects this error?

Select ONE answer:

1. Debit Share premium £25,000, Credit Share capital £25,000
2. Debit Share capital £25,000, Credit Share premium £25,000
3. Debit Share capital £37,500, Credit Share premium £37,500
4. Debit Share capital £25,000, Credit Cash at bank £25,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> This is the transfer of the premium to the share premium account.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc made an issue of shares for cash of 1,000,000 * 50p shares at a premium of 30p per share.

Which of the following general journals correctly records the issue of new shares?

Select ONE answer:

1. Debit Share capital £500,000, Debit Share premium £300,000, Credit Cash at bank £800,000
2. Debit Cash at bank £800,000, Credit Share capital £500,000, Credit Share premium £300,000
3. Debit Cash at bank £1,300,000, Credit Share capital £1,000,000, Credit Share premium £300,000
4. Debit Share capital £1,000,000, Debit Share premium £300,000, Credit Cash at bank £1,300,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> Share capital will be credited with the nominal value of the shares (1m × 50p) – the balance goes to share premium (1m × 30p).
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.