A-LevelAccountingPreparation of financial statements9706/12 · May/June 2016 · Q171 Mark

A company issues 100000 new $1 ordinary shares at a premium of $0.20 each. Which effect does this have on the statement of financial position?

AEquity increases by the nominal value of the shares but decreases by the value of the premium.

BEquity increases by the nominal value of the shares only.

CNet assets increase by the nominal value of the shares plus the value of the premium.

DNet assets increase by the nominal value of the shares but decrease by the value of the premium.

✓ Correct answer

C: Net assets increase by the nominal value of the shares plus the value of the premium.

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Topic: Preparation of financial statements, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, May/June 2016 Paper 1 Variant 2, question 17.

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A company issues 100000 new $1 ordinary shares at a premium of $0.20 each. Which effect does this have on the statement of financial position?

✓ Correct answer

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