Meridian Engineering Plc offered for public subscription ordinary shares of nominal value each at an issue price of per share. All the shares were fully subscribed and paid for in full. What is the total amount, in Naira (), to be credited to the Share Premium Account?
Answer: 125000 ₦
Answer
The total amount credited to the Share Premium Account is ₦125,000.
When shares are issued at a price above nominal value, the nominal value (250,000 × ₦2.50 = ₦625,000) is credited to Ordinary Share Capital, while the excess price of ₦0.50 per share (250,000 × ₦0.50 = ₦125,000) is credited to the Share Premium Account.
Step-by-Step Solution
Key Concept
Accounting for Share Issue at a Premium