Page 120 - Accountancy_F5

Hasa Ltd exercised the right to buy new shares, the following are the records in the
investment account:

Solution 4.2

Dr In the books of Hasa Ltd
FOR ONLINE READING ONLY
Common Shares Account Cr
Particulars Nominal Income Capital Particulars Nominal Income Capital

LANGUAGE EDITING
TZS TZS TZS TZS TZS TZS
1 Jan. 2,000,000 2,500,000
st
LANGUAGE EDITING
2023
Bank
1 Sept. 1,000,000 800,000
st
Rights
issue
Workings:

1. The nominal value of the right issue =
1 # , 2 000 shares # TZS , 1 000 = , 1 000 000
,
2
2. Capital value = 1 # , 2 000 shares # TZS 800 = TZS 800 ,000
2
When the rights shares are sold, recording is done only in the capital column on the
credit side of the investment account with the amount received. This implies that the
total cost of the shareholding is reduced. Similarly, whenever an investor disposes
common stock, the value of the bonus issue and/or rights issue will reduce the total
cost of shareholding to determine whether there is profit or loss on disposal.

Example 4.3
On 1st Jan, 2023 Hasa Ltd purchased 2,000 ordinary shares of Sasa Plc of TZS
1,000 each at TZS 2,500,000. On 1 September 2023, Sasa Plc gave the existing
st
shareholders a right to buy 1 new share for every 2 shares held at TZS 800 each.
Hasa Ltd exercised the right to buy new shares. On 15 December it sold 500 shares
th
at a market price of TZS 1,200 each. The following records will be shown in the
investment account of Hasa Ltd on 31 Dec 2023.
st

Student’s Book Form Five
107

23/06/2024 17:35
ACCOUNTANCY_DUMMY_23 JUNE.indd 107 23/06/2024 17:35
ACCOUNTANCY_DUMMY_23 JUNE.indd 107