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 additional share capital will Large report?

Question

Quizplus · Accepted Answer

The large company is paying for the small company by issuing 1 million £1 shares. Therefore, the additional share capital reported will be £1,000,000 (1 million shares multiplied by the par value of £1 per share). Option A is incorrect as it represents the total amount paid to take over the small company, not the additional share capital. Option C is also incorrect as it represents the difference between the total amount paid and the additional share capital. Option D is not applicable as the large company is issuing new shares as part of the transaction.

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