BANANA Corporation is authorized to issue 150,000 ordinary shares at P10 par value and 25,000 preference shares at P25 par value. During its first year of operation, the following share capital transactions have been summarized:Preference Share Capital – P 437,500;Ordinary Share Capital - P 250,000;Share Premium – Preference – P 201,250;Share Premium – Ordinary – P 175,000.00 The average selling price for the preference shares is closest to Group of answer choicesP14.60P36.50P25.00P17.00
Question
BANANA Corporation is authorized to issue 150,000 ordinary shares at P10 par value and 25,000 preference shares at P25 par value. During its first year of operation, the following share capital transactions have been summarized:Preference Share Capital – P 437,500;Ordinary Share Capital - P 250,000;Share Premium – Preference – P 201,250;Share Premium – Ordinary – P 175,000.00 The average selling price for the preference shares is closest to Group of answer choicesP14.60P36.50P25.00P17.00
Solution
To find the average selling price for the preference shares, we need to add the Preference Share Capital and the Share Premium for Preference shares, then divide by the number of preference shares issued.
First, we need to find out how many preference shares were issued. We know that the Preference Share Capital is P 437,500 and each share has a par value of P25. So, the number of preference shares issued is P 437,500 / P 25 = 17,500 shares.
Next, we add the Preference Share Capital (P 437,500) and the Share Premium – Preference (P 201,250) to get the total amount received from the issuance of preference shares. This equals P 437,500 + P 201,250 = P 638,750.
Finally, we divide the total amount received from the issuance of preference shares (P 638,750) by the number of preference shares issued (17,500) to get the average selling price per share. This equals P 638,750 / 17,500 = P36.50.
So, the average selling price for the preference shares is closest to P36.50.
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