1) Is each of the following statements about a rights issue true or false?
A. A rights issue is offered to the entity’s existing shareholders and is usually at a discounted price compared to the nominal value of a share.
B. A rights issue capitalises the entity’s reserves, which can be a disadvantage, as this can reduce the amount of reserves available for future dividends
2) The issued share capital of Beta, a limited liability company, is as follows:
Ordinary shares of 10c each 1,500,000
8% Redeemable preference shares of 50c each 500,000
In the year ended 31 December 20X9, the company has paid the preference dividend for the year and an interim dividend of 4c per share on the ordinary shares. A final ordinary dividend of 3c per share was proposed, after the reporting date.
What amount will be recognised for dividends in the equity section of the statement of financial position at 31 December 20X9?
3) The statement of financial position of Andrews Co shows closing retained earnings of $483,250. The statement of profit or loss showed profit of $89,900. Cartwright Co paid last year’s dividend of $20,500 during the year and proposed a dividend of $10,000 at the year end. This had not been approved by the shareholders at the end of the year.
What is the opening retained earnings balance?
4) When a company makes a rights issue of equity shares which of the following effects will the issue have?
1. Retained earnings are reduced
2. Investments are increased
3. Share premium account is reduced
4. Assets are increased
5) Which of the following statements about preference shares is true?
6) An organisation's year end is 30 December. On 1 April 20X6 the organisation took out a loan of $120,000 with annual interest of 9%. The interest is payable in equal instalments on the first day of July, October, January and April in arrears.
How much should be charged to the statement of profit or loss (SPL) for the year ended
31 December 20X9, and how much should be accrued on the statement of financial position (SOFP)?
7) Which of the following statements is true in relation to a bonus issue of shares by an entity?
8) Identify, by indicating the relevant box in the table below, whether each of the following statements about company financial statements is true or false, according to International Financial Reporting Standards.
A. The statement of profit or loss and other comprehensive income shows the gain on revaluation of non-current Assets for the period.
B. Dividends paid on ordinary shares should be included in the statement of profit or loss and other comprehensive income.
C. Dividends paid on redeemable preference shares are treated in the same way as dividends Paid on ordinary shares.
9) An entity has issued 200,000 equity shares with a nominal value of $0.50 each and a share premium account balance of $50,000.
What accounting entries are required if the entity was to make a bonus issue of one share for four held?
10) On 31 March 2019, Willow, a limited liability company, issued share capital of $100,000 (50c ordinary shares). The company also has an investment of 80,000, 25c shares in Air, a limited liability company. The following is an extract from Willow’s ledger accounts:
Which of the following statements is correct?