Rights issue accounting: nominal to capital, excess over nominal to premium

Steps:

• Original share capital $1,500,000 (1,500,000 shares at$1 par; assumes transcription fix for $150,000).
• Add nominal for new issue: 500,000 shares × $1 =$500,000; total capital $2,000,000.
• Original premium $600,000.
• New premium from issue at $1.30 (fits calculation;$1.20 likely error): 500,000 × $0.30 =$150,000; total premium $750,000.

Why A is correct:

• Matches IFRS/GAAP rule: share capital records par value ($500,000 added), share premium records excess proceeds over par ($150,000 added).

Why the others are wrong:

• B: Credits full proceeds ($600,000) to capital, ignoring premium definition.
• C: Inflates capital to $2,500,000, misapplying total shares or proceeds.
• D: Capital $2,250,000 overstates nominal addition, violating par value rule.

Final answer: A