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At the start of year 3, 12000 new ordinary shares were issued at a premium of...

At the start of year 3, 12000 new ordinary shares were issued at a premium of $1.5 per share in order to help raise further funds. given that ordinary shares have a nominal value of $1 for each share.

For this statement, does it means that I only need to put a credit entry of $18000 into share premium account or I also need to increase the ordinary share capital account by $12000? Then the total increase in cash account would be $30000?

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Answer #1
The journal entry for the above will be
Account Titles Debit Credit
Cash (12000 shares* $ 1.5) 18000
Ordinary Share capital or Common stock(12000*$ 1) 12000
Share premium or APIC-Common stock (12000 shares* $ 0.5) 6000
Cash of only 12000*1.5= $ 18000 is received
Each share is sold at a premium of $ 1.5-$1= $ 0.5
So, cash is debited for $ 18000
Share premium is credited for $ 6000 &
Share capital is credited for the nominal value of $ 12000
Premium received is varioulsy called--Paid-in-capital in excess of par or Additional paid-in capital --- & maintained in a separate account---- even though the total of the nominal account +this premium is the total amount received from the shareholders--- & both appear one after the other , in the stockholders' equity section of the balance sheet.
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