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question bank 1

S

salj67

Member
1.23
Could someone please explain how its solved?
How is the amount above par value is 4?
And where does this formula come from?
 
Q1.23

Hi salj67

The par value of the shares is £1 each.
The sale price is £5 each.
The difference is £4 per share - ie the shares are selling at £4 above par.

There are 40,000 new shares, so this raises £200,000 altogether.
The par value per share gets added to the share capital - ie 1 x 40,000 = £40,000
The difference between sale price and par value gets added to the share premium account - ie 4 x 40,000 = £160,000

Hope that helps

Best wishes
Stuart

Stuart Underwood
ActEd Tutor
 
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