Question 1

Section A

Gamma PLC has 1,000,000 ordinary shares of $0.50 each in issue. The share premium account has a balance of $300,000. The company makes a 1-for-4 bonus issue, utilizing the share premium account.

What is the balance on the share premium account immediately after the bonus issue?

Accepted Answer

Calculate the number of new shares issued. Multiply by the nominal value per share to find the amount capitalized. Deduct this amount from the share premium account.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Deducting the number of shares (250,000) directly from the dollar value of the share premium account.

Section A

Gamma PLC has 1,000,000 ordinary shares of $0.50 each in issue. The share premium account has a balance of $300,000. The company makes a 1-for-4 bonus issue, utilizing the share premium account.

What is the balance on the share premium account immediately after the bonus issue?

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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