The share premium account would be?

A company advertised and issued N750,000, 12% preference shares of N1 each to be issued at N1.50 per share. Applications for N1,370,000 were received at 30k per share. 70k per share (including premium) was due om allotment while 25k per share was due on each of the remaining two calls. All amounts due were received . Application money for 120,000 shares was refunded to unsuccessful applicants were allotment shares on pro-rata basis.

A. credited with application and allotment N187, 500
B. debited with appllication and allotment N375,000
C. credited with application and allotment N375, 000
D. debited with application and allotment N187, 500

Correct Answer:

Option C – credited with application and allotment N187, 500

Explanation

Premium shares = Issue price per share – Face value/par value per share x No of shares.

Issue price = N1.50

Face value = N1

No. of shares = 750,000

1.50 – 1 = 0.50

0.50 x 750,000 = 375,000

Share Application or share allotment or Share capital A/c all are personal accounts as they represent money from the shareholders and when money is due, these are to be debited because of the rule “Debit the receiver”.