Shareholders Equity
1. What is a share? (1 mark)
2. Identify two advantages of a private placement of shares as compared with a public issue. (1 mark)
3. The shareholders of Quinninup Ltd hold 25 000 A class ordinary shares, fully paid at $4.50 each. On 17 April 2012, the company directors voted to make a 1 for 5 rights offer to these shareholders. The additional shares were offered at $1.75 each, payable in full one month after acceptance.
The offer closed on 31 May 2012 with 90% of the shareholders accepting. Shares were duly allotted on that date and all monies were received when due.
Required
Prepare journal entries to record these events, show all workings. (2 marks)
4. Forrest Ltd has issued 10 000 5% cumulative preference shares. Explain the meaning of the term “cumulative”. (1 mark)
5. The share capital of Murdoch Ltd consists of:
52 000 Ordinary A shares @ $2.50, fully paid $130 000
15 000 Ordinary B shares @ $1.50, paid to 80c 11 000
On 28 June 2012, the directors declared a 7c per share final dividend. Shareholder approval is not required to pay dividends.
Required
Prepare the journal entries to record the dividend, show all workings. (2 marks)
6. Eyre Ltd’s share capital consists of 65 000 ordinary shares of $2.30 each, fully paid. On 17 February 2012 the directors offered these shareholders the right to acquire one new share for each five held at a price of $2.52 each, payable on acceptance. The offer closed on 17 March 2012 by which date acceptances had been received from the holders of 48 000 shares. The new shares were allotted on that day.
Required
Prepare journal entries to record the above events. Show all workings (2 marks)
7. Esperance Ltd issued a prospectus offering 100 000 ordinary shares at $3.00 each, payable in full on application. The issue was underwritten by Staysure Insurance Co. for a commission fee of $7 500.
Required
Explain how you would account for the commission fee. Why? (1 mark)
8. On 15 April 2012, the directors of Hyden Ltd
2. Identify two advantages of a private placement of shares as compared with a public issue. (1 mark)
3. The shareholders of Quinninup Ltd hold 25 000 A class ordinary shares, fully paid at $4.50 each. On 17 April 2012, the company directors voted to make a 1 for 5 rights offer to these shareholders. The additional shares were offered at $1.75 each, payable in full one month after acceptance.
The offer closed on 31 May 2012 with 90% of the shareholders accepting. Shares were duly allotted on that date and all monies were received when due.
Required
Prepare journal entries to record these events, show all workings. (2 marks)
4. Forrest Ltd has issued 10 000 5% cumulative preference shares. Explain the meaning of the term “cumulative”. (1 mark)
5. The share capital of Murdoch Ltd consists of:
52 000 Ordinary A shares @ $2.50, fully paid $130 000
15 000 Ordinary B shares @ $1.50, paid to 80c 11 000
On 28 June 2012, the directors declared a 7c per share final dividend. Shareholder approval is not required to pay dividends.
Required
Prepare the journal entries to record the dividend, show all workings. (2 marks)
6. Eyre Ltd’s share capital consists of 65 000 ordinary shares of $2.30 each, fully paid. On 17 February 2012 the directors offered these shareholders the right to acquire one new share for each five held at a price of $2.52 each, payable on acceptance. The offer closed on 17 March 2012 by which date acceptances had been received from the holders of 48 000 shares. The new shares were allotted on that day.
Required
Prepare journal entries to record the above events. Show all workings (2 marks)
7. Esperance Ltd issued a prospectus offering 100 000 ordinary shares at $3.00 each, payable in full on application. The issue was underwritten by Staysure Insurance Co. for a commission fee of $7 500.
Required
Explain how you would account for the commission fee. Why? (1 mark)
8. On 15 April 2012, the directors of Hyden Ltd