Eko Manufacturing Plc issues 5,000,000 ordinary shares at ₦10 par value for ₦14 per share. What amount will be credited to the Share Premium Account?
A₦50,000,000
B₦70,000,000
C₦20,000,000CORRECT
D₦120,000,000
ICANBusiness, Management and FinanceSources of Finance2022
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Why the answer is C, and why the others tempt you.
The share premium is the excess of the issue price over the par value: (₦14 − ₦10) × 5,000,000 = ₦4 × 5,000,000 = ₦20,000,000. The par value of ₦10 × 5,000,000 = ₦50,000,000 goes to the ordinary share capital account, and the total proceeds of ₦70,000,000 are split between these two accounts.
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