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A Level Accounting (9706)•9706/12/M/J/18
Question 16 from 9706/12/M/J/18

Explanation

Share Issuance at Premium

Steps:

  • Calculate nominal value: 50,000 shares × 0.50=0.50 = 0.50=25,000.
  • Calculate total proceeds: 50,000 shares × 0.60=0.60 = 0.60=30,000.
  • Debit Bank account for cash received: $30,000.
  • Credit Share Capital for par value: $25,000 (remainder to Share Premium).

Why A is correct:

  • Matches IFRS/GAAP rule: Debit cash for full proceeds; credit Share Capital only for nominal amount (25,000),withpremium(25,000), with premium (25,000),withpremium(5,000) implied as separate credit.

Why the others are wrong:

  • B: Incorrectly debits premium (should be credited) and credits capital for full proceeds.
  • C: Reverses debits/credits—Share Capital is credited, not debited; Bank is debited, not credited.
  • D: Credits Bank (should be debited) and overstates Share Capital at full proceeds.

Final answer: A

Topic: The accounting system

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