Question

In: Accounting

1a) A company has 50,000,000 shares at 10p each nominal value. It makes a 1 for...

1a)

A company has 50,000,000 shares at 10p each nominal value. It makes a 1 for 5 bonus issue from its retained profits, which was £2,000,000 before the issue.

Fill out the table below to reflect the accounting of the issue.

Pre issue Issue Post issue

Share capital £5,000,000

Retained profits £2,000,000

Total £7,000,000

1b.)

A company has 50,000,000 shares at 10p each nominal value. It makes a 1 for 5 rights issue at 15p per share.

Fill out the table below to reflect the accounting of the issue

Pre issue Issue Post issue

Share capital £5,000,000

Share premium

Retained profits £2,000,000

Total £7,000,000

Bank

Expert Solution

1a.)		Pre issue £	Post issue £	Post issue working
	Share capital	5,000,000	6,000,000	=5000000+1000000
	Retained profits	2,000,000	1,000,000	=2000000-1000000
	Total	7,000,000	7,000,000

	Working

	Number of Bonus share	10,000,000	=50000000*1/5

	Nominal value of Bonus shares	1,000,000	=10000000*0.1




1b.)		Pre issue £	Post issue £	Post issue working
	Share capital	5,000,000	6,000,000	=5000000+1000000
	Share premium	-	500,000
	Retained profits	2,000,000	2,000,000
	Total	70,00,000	8,500,000

	Working

	Number of right share	10,000,000	=50000000*1/5

	Share Capital increase	1,000,000	=10000000*0.10

	Share premium increase	500,000	=10000000*0.05

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