A company issues 10000 shares at a price of £3.00 per share. The nominal value of the shares is £1.00 per share. What should be shown in the statement of financial position and the cash flow statement in respect of this transaction?

Question

Quizplus · Accepted Answer

The correct answer is C because when a company issues shares at a price above their nominal value, the excess amount (in this case, £2.00 per share) is recorded in a separate account called share premium. Therefore, the bank balance increases by the total amount received (£30,000), the share capital increases by the nominal value of the shares issued (£10,000), and the share premium account increases by the excess over the nominal value (£20,000). The cash flow statement will show a cash inflow of £30,000, reflecting the total cash received from the issue of shares.

A Company Issues 10000 Shares at a Price of £3