Rights issue A company has an issued share capital of 500 000 ordinary shares of $1 each. The company makes a rights issue of one ordinary share for every two shares held at $1.20 per share. What will the effect be on the share capital account and on the share premium account?

A. Share capital increases by $250 000. Share premium account increases by $50 000

B. Share capital increases by $300 000. Share premium account increases by $50 000

C. Share capital increases by $250 000. Share premium account is unchanged

D. Share capital increases by $300 000. Share premium account is unchanged.