Large company agrees to pay £1,750,000 to take over small company.Large company's shares have a market value of £1.75.The £1,750,0000 is paid by the issue of 1 million £1 shares.
What share premium will Large report?

Question

Quizplus · Accepted Answer

Share premium is the amount paid by investors for shares that is in excess of the par value of the shares. In this case, 1 million shares have been issued at a par value of £1 each, which amounts to £1 million. Since the total consideration paid by the large company is £1,750,000, the excess amount paid over the par value will be the share premium. Therefore, the share premium will be £750,000 (i.e. £1,750,000 - £1,000,000).

Large Company Agrees to Pay £1,750,000 to Take Over Small