Question 1

**Section A**

Saturn PLC has 500,000 ordinary shares of $0.25 in issue. It makes a rights issue of 1 new share for every 5 existing shares at a price of $1.50 per share. All rights are taken up.

What is the increase in the share premium account as a result of this rights issue? (Enter numbers only)

Accepted Answer

Calculate the number of new shares issued. Calculate the premium per share (Issue price - Nominal value). Multiply the number of new shares by the premium per share.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the total cash received ($150,000) instead of just the premium, or using the wrong nominal value.

Section A

Saturn PLC has 500,000 ordinary shares of $0.25 in issue. It makes a rights issue of 1 new share for every 5 existing shares at a price of $1.50 per share. All rights are taken up.

What is the increase in the share premium account as a result of this rights issue? (Enter numbers only)

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 1

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