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    Question

    A company’s share’s face value is 10, book value is 20, Right issue price is 30 and Market price is 40, while recording the issue of right share, the securities premium will be credited with:

    A 10 Correct Answer Incorrect Answer
    B 20 Correct Answer Incorrect Answer
    C 30 Correct Answer Incorrect Answer
    D 40 Correct Answer Incorrect Answer
    E 50 Correct Answer Incorrect Answer

    Solution

    To determine the amount credited to the securities premium account when recording the issue of right shares, we need to consider the difference between the issue price and the face value of the shares. In this case: Face value of the share = 10 Right issue price = 30 The difference between the issue price and the face value is 30 - 10 = 20. So, the securities premium will be credited with the difference, which is 20.

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