Answer to Question #250840 in Financial Math for Millicent

Question

SISA Ltd is a company with 40 000 authorised Ordinary Share Capital with a par value of R1. The company issued 30 000 shares at R1.30 for each share. What would be the effect of this transaction in SISA’s records?

Select one:

a. Ordinary share capital will increase by R39 000 and share premium will increase by R9 000.

b. Ordinary share capital will increase by R30 000 and share premium will increase by R39 000.

c. Ordinary share capital will increase by R39 000 and share premium will be unaffected.

d. Ordinary share capital will increase by R30 000 and share premium will increase by R9 000.

Answer 1

Answer: c. Ordinary share capital will increase by R39 000 and share premium will be unaffected.

Ordinary share capital will increase by:

$30000\cdot1.3=R39000$