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:

Debit Cash $120,000; Credit Share Capital $120,000

Debit Cash $120,000; Credit Share Capital $50,000; Credit Share Premium $70,000

Debit Cash $50,000; Debit Share Premium $70,000; Credit Share Capital $120,000

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.

Question 21 All questions Question 23

Practice the full ACCA FA — Financial Accounting Practice Exam 1

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