A limited liability company issued 500,000 ordinary shares of ₦1.00 each at a premium of 50 kobo per share. What amount should be credited to the Share Premium Account?
A₦500,000
B₦750,000
C₦250,000CORRECT
D₦1,250,000
GCEFinancial AccountingCompany Accounts2022
AI
Toaster Teacher
Why the answer is C, and why the others tempt you.
The share premium is the excess over the nominal (par) value: 500,000 shares × ₦0.50 = ₦250,000. The nominal value of ₦500,000 is credited to the Ordinary Share Capital Account, while only the premium of ₦250,000 goes to the Share Premium Account. Option B (₦750,000) is the total proceeds, and Option D is a distractor.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →
Practice more Financial Accounting questions
GCE Financial Accounting has thousands more questions like this — with Worked answers on every one.