Rights issue and Bonus Issue ( video below)
At 30 June 20X4 a company’s capital structure was as follows:
| $ | |
| Ordinary share capital | |
| 1,000,000 shares of 25c each | 250,000 |
| Share premium account | 200,000 |
In the year ended 30 June 20X5 the company made a rights issue of 1 share for every 2 held at $1 per share and this was taken up in full. Later in the year the company made a bonus issue of 1 share for every 5 held, using the share premium account for the purpose.
What was the company’s capital structure at 30 June 20X5?
Answer
| $’000 | |
| Ordinary shares | |
| Opening balance | 250 |
| Rights issue 500,000 * x 25c | 125 |
| Bonus issue 300,000** x 25c | 75 |
| 450 | |
| Share premium Opening balance | 200 |
| Rights issue 500,000 x 75c | 375 |
| Bonus issue 300,000 x 25c | (75) |
| 500 | |
| *1,000,000 x 1 /2 = 500,000 | |
| ** (1,000,000 + 500,000) x 1/5 = 300,000 |
Journal Entry
Rights issue
Dr. Cash………………………………500
Cr. Share capital…………………………………….125
Cr. Share premium…………………………………375
Bonus Issue
Dr. share premium………………75
Cr. Share Capital…………………………………..…75
Note: if you cannot see any videos above, please click this link @ https://youtu.be/Put7KOb_ubk