Apex Global Resources Plc has an issued share capital of 3,000,000 ordinary shares of \tex… — JAMB UTME

Apex Global Resources Plc has an issued share capital of 3,000,000 ordinary shares of $\text{₦}1.00$ each fully paid. The Share Premium account currently has a credit balance of $\text{₦}800,000$ . The company decides to make a bonus issue of 1 new share for every 5 ordinary shares held, utilizing the Share Premium account. What is the remaining balance in the Share Premium account after the capitalization for the bonus issue?

$\text{₦}200,000$ Answer
B
$\text{₦}600,000$
C
$\text{₦}640,000$
D
$\text{₦}0$

Answer

The remaining balance in the Share Premium account after the bonus issue is

\text{₦}200,000

The company issues

600,000

bonus shares (1 for 5 of

3,000,000

) at a nominal value of

\text{₦}1.00

each, requiring

\text{₦}600,000

from reserves. Deducting

\text{₦}600,000

from the initial Share Premium credit balance of

\text{₦}800,000

leaves a remaining balance of

\text{₦}200,000

Step-by-Step Solution

Calculate the total number of bonus shares issued.

\text{Bonus Shares} = \frac{1}{5} \times 3,000,000 = 600,000 \text{ shares}

The bonus issue ratio is 1 new share for every 5 ordinary shares currently held.

Determine the monetary value of the bonus shares to be capitalized.

\text{Capitalized Amount} = 600,000 \text{ shares} \times \text{₦}1.00 = \text{₦}600,000

Bonus shares are capitalized at their nominal (par) value using available capital reserves.

Compute the remaining balance in the Share Premium account.

\text{Remaining Balance} = \text{₦}800,000 - \text{₦}600,000 = \text{₦}200,000

Deducting the amount capitalized for the bonus issue from the opening Share Premium balance gives the unutilized balance.

Key Concept

Capitalization of Reserves for Bonus Issues

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