I am stuck on a share question out of my Ian Harrison A Level book. Have got the answer but don't know where the extra 200 has come from in the current assets. Here is the question followered by the answer.
The following balance sheet has been prepared at 28 February 2009
Non current assets 1836
Current assets 457
Current liabilities (349) 108
1944
Ordinary shares of £1 each 900
Share premium account 450
Retained earnings 594
1944
On 28 Feb 2009 Yypleat plc made a rights issue of 100,000 ordinary shares at a premium of £1 each. Immediately after the rights issue a bonus issue of shares of one ordinary share for every two held was made (the rights issue of shares was eligible for the bonus issue). It is comany policy to maintain reserves in their most flexible form. Here is the answer where does the figure i have highlighted in blue come from.
Non current assets 1836
Current assets 657
Current liabilities (349) 308
2144
Equity
Ordinary shares of £1 each 1500
Share premium account 50
Retained earnings 594
2144
I know its the money from the shares but cannot arrive at that figure. Many thanks. Sue
It may be that you need to see that the rights issue was at a premium of £1, and as the nominal value was also £1, the shareholders taking up the rights paid £2 per share. Does this help?
in case Ian's answer didn't clarify matters the full answer would be :
Rights issue : share account 900k + 100k (share capital) = 1m share premium = 450k + 100k (share premium) = 550k Current assets +200k (£1 per share + £1 premium * 100k new shares) so 457k becomes 657k
Then the bonus issue is 1m shares at 1 for 2 = 500k shares using up 500k of the 550k share premium leaving just 50k
Equity (2144k) = Non Current Assets (1836k) + current Assets (657k) - current liabilities (349k)
Ian's excellent answer was just what you needed but thought that a full breakdown would clarify matters if you were still scrathcing your head on this one.
All the best,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you Ian and Shaun for your detailed answer, the penny has dropped. I was doing these exercises till late last night, I think with working all day I spent too long studying last night. But once I get into study mode I find it very hard to put my books down. Kind Regards. Sue
Told you that the keeping it to four hours a week would just be wishful thinking! lol
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
