- 1 Marks
Question
What is the balance on the share premium account following the rights issue?
A. N140,000
B. N150,000
C. N160,000
D. N190,000
E. N200,000
Answer
D
Explanation:
The correct answer is D because the calculation of the new share premium is as follows:
- Rights issue shares: 200,000 × (1/5) = 40,000 shares
- Premium per share: N1.00 (N1.50 issue price – N0.50 nominal value)
- Additional premium: 40,000 × N1.00 = N40,000
- New share premium balance: N150,000 + N40,000 = N190,000
- Tags: Company Finance, Rights Issue, Share Premium
- Level: Level 1
- Topic: Accounting Concepts
- Series: MAY 2014
- Uploader: Theophilus