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Difficulty: MediumIssue of Shares at Par, Premium, and Discount

Kresta Marine Services Plc issued 120,000120,000 ordinary shares of ₦1.50\text{₦}1.50 nominal value each at a premium of 10%10\%. What is the total amount, in naira (₦\text{₦}), to be credited to the Share Premium Account?

Answer: 18000 ₦

Answer

The total amount credited to the Share Premium Account is ₦18,000\text{₦}18,000.
The nominal value per share is ₦1.50\text{₦}1.50. A 10%10\% premium means an excess of ₦0.15\text{₦}0.15 per share above par value (10%×₦1.50=₦0.1510\% \times \text{₦}1.50 = \text{₦}0.15). For 120,000120,000 shares, the total amount credited to the Share Premium Account is 120,000×₦0.15=₦18,000120,000 \times \text{₦}0.15 = \text{₦}18,000.

Step-by-Step Solution

1
Calculate the share premium value per share
Premium per share = 10%×₦1.50=₦0.1510\% \times \text{₦}1.50 = \text{₦}0.15
Share premium is calculated as the specified percentage of the share's nominal (face) value.
2
Determine the total share premium amount to credit to the Share Premium Account
Total Share Premium = 120,000×₦0.15=₦18,000120,000 \times \text{₦}0.15 = \text{₦}18,000
The total premium collected across all issued shares must be credited to the Share Premium Account.

Key Concept

Accounting treatment and calculation of share premium when shares are issued above par value.
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Topics

Issue of Shares at Par, Premium, and Discount

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