Shareholders Equity Essay

1398 Words Apr 7th, 2015 6 Pages
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
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On 27 June 2012, the directors of Esperance Ltd declared an 8c per share ordinary share dividend. At that date 85 000 ordinary shares were on issue and fully paid. Shareholder approval is required to pay dividends and is normally obtained at the annual general meeting which is scheduled to be held on 29 September 2012. Cheques are mailed to shareholders one month from the date of approval.

Required
Discuss how and when the dividend would be recorded by Esperance Ltd. (2 Marks)

21. Describe how a general reserve and an asset revaluation reserve are created. (2 Marks)

22. On 21 July 2012, Salmon Gums Ltd offered each of its shareholders the opportunity to buy 1 option for each 10 shares held at a price of 0.90 each. The option entitles the holder to acquire one ordinary share for $3.20 and is exercisable between 1 August and 30 September 2015. Currently, Salmon Gums Ltd has 190,000 fully paid ordinary shares. The offer closed on 21 August with applications (and monies) for 17 560 options having been received.

Required
Prepare the journal entries to record the above events, show all workings. (1 Mark)

23. On 17 November 2012, the directors of Dardanup Ltd forfeited 25 000 shares for non-payment of a call. The issue price of the shares was $3.20 each payable $2.40 on application and then an 80cent call. The company’s constitution stipulates that forfeited shares are not to be reissued, and a full refund is to be made to the former

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