Reference no: EM132982397

Problem 1: Prior to 1 December 2020, the share capital account of Gallowmere Ltd had a balance of $600 000. This reflected their issued share capital, which consisted of 200,000 ordinary shares, issued at $3 and paid in full. On 1 December 2020, the company directors announce a 1-for-10 non renounceable rights issue with each new share issued under the rights scheme costing $4, payable in full upon accepting the offer. Zarok Ltd has underwritten 50% of the rights issue in return for a $10,000 fee. If the holders of 150,000 shares exercise their rights, what will the balance of the share capital account be once the rights issue is complete? (Note: to be clear, we are looking for the dollar balance, NOT the number of outstanding shares)

Option 1: $630 000
Option 2: $635 000
Option 3: $650 000
Option 4: $670 000