Question

On January 1, Hiro Corp. issues 1,000 no-par ordinary shares for €15 per share. The shares...

On January 1, Hiro Corp. issues 1,000 no-par ordinary shares for €15 per share. The shares have a stated value of €5 per share. When Hiro prepares the journal entry to record the issuance of the shares which of the following will be recorded?

Select one:

a. Debit Share Premium—Ordinary €15,000.

b. Credit Share Premium—Ordinary €10,000

c. Debit Share Capital—Ordinary €5,000.

d. Credit Share Capital—Ordinary €15,000.

Business   Accounting   
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Answer #1

Ans .

Correct option b

Given: Number of Shares issued = 1,000

Issue Price of Share = € 15

Stated Value (Nominal Value ) of Share = € 5

Journal Entry in the books of Hiro Corp.

Date Particular Debit Credit
On issue of shares
January,1 Bank A/c. (1,000 × €15) €15,000

To Share Capital. (1,000× €5)

 €5,000
To Securities Premium (1,000 × €10) €10,000
( Being issue of shares for Premium being recorded)

As the Securites Premium is being credited with € 10,000 the correct Option is "b"

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