Share Issuance: Nominal Value, Premium, and Cash Impact

Steps:

• Nominal value: 100,000 shares × $1 =$100,000 increase in ordinary share capital.
• Share premium: 100,000 × $2 =$200,000 increase in capital reserves.
• Total proceeds: 100,000 × ($1 +$2) = $300,000 increase in cash equivalents.
• Market value of $4 is irrelevant for initial accounting entry.

Why D is correct:

• Revenue reserves accumulate from profits (per accounting standards like IAS 1); share premiums are capital transactions credited to capital reserves, not revenue.

Why the others are wrong:

• A: Premium correctly increases capital reserves by $200,000.
• B: Cash increases by issue price proceeds of $300,000.
• C: Share capital increases by nominal value of $100,000.

Final answer: D