ExpertEasy2 marksMultiple Choice
ACCA · Question 22 · Preparing basic financial statements
Section A
Jupiter PLC issues 100,000 ordinary shares of $0.50 nominal value at a price of $1.20 per share.
What is the correct double entry to record this issue?
Section A
Jupiter PLC issues 100,000 ordinary shares of $0.50 nominal value at a price of $1.20 per share.
What is the correct double entry to record this issue?
Answer options:
A.
Debit Cash $120,000; Credit Share Capital $120,000
B.
Debit Cash $120,000; Credit Share Capital $50,000; Credit Share Premium $70,000
C.
Debit Cash $50,000; Debit Share Premium $70,000; Credit Share Capital $120,000
D.
Debit Share Capital $50,000; Debit Share Premium $70,000; Credit Cash $120,000
How to approach this question
Calculate total cash received. Calculate the nominal value of the shares (goes to Share Capital). The difference between cash received and nominal value goes to Share Premium.
Full Answer
B.Debit Cash $120,000; Credit Share Capital $50,000; Credit Share Premium $70,000✓ Correct
Total cash received = 100,000 shares * $1.20 = $120,000. Share capital is recorded at nominal value: 100,000 * $0.50 = $50,000. The excess is share premium: 100,000 * ($1.20 - $0.50) = $70,000.
Common mistakes
Crediting the full amount to share capital.
Practice the full ACCA FA — Financial Accounting Practice Exam 1
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