Star Ltd. presents the following information from the Statement of Financial Position: Equity £ Capital (120, 000 shares of £1 120,000 each) Retained Profits Share premium Total Equity 22,000 50,000 192,000 Star Ltd. issues 20, 000 ordinary shares for a price of £2. Considering the previous information and the economic transaction of issuing ordinary shares, which of the following statements is correct? O a. The company increases cash in £20,000 and share premium decreases in the same amount. O b. The company decreases cash in £40,000 and total equity remains unchanged. O c. The company increases cash in £40,000 and equity increases in the same amount. O d. None of the answers is true.

Star Ltd. presents the following information from the Statement of Financial Position: Equity £ Capital (120, 000 shares of £1 120,000 each) Retained Profits Share premium Total Equity 22,000 50,000 192,000 Star Ltd. issues 20, 000 ordinary shares for a price of £2. Considering the previous information and the economic transaction of issuing ordinary shares, which of the following statements is correct? O a. The company increases cash in £20,000 and share premium decreases in the same amount. O b. The company decreases cash in £40,000 and total equity remains unchanged. O c. The company increases cash in £40,000 and equity increases in the same amount. O d. None of the answers is true.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Star Ltd. presents the following information from the Statement of Financial Position:
Equity
£
Capital (120, 000 shares of £1 120,000
each)
Retained Profits
Share premium
Total Equity
22,000
50,000
192,000
Star Ltd. issues 20, 000 ordinary shares for a price of £2. Considering the previous information and the
economic transaction of issuing ordinary shares, which of the following statements is correct?
O a. The company increases cash in £20,000 and share premium decreases in the same amount.
O b. The company decreases cash in £40,000 and total equity remains unchanged.
O c. The company increases cash in £40,000 and equity increases in the same amount.
O d. None of the answers is true.

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