Shareholders’ Equity Quiz Questions

SHAREHOLDERS’ EQUITY

QUIZ QUESTIONS

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 2013, the company directors voted to make a 1 for 5 rights offer to these shareholders. The additional shares were offered at $2.75 each, payable in full one month after acceptance.

The offer closed on 31 May 2013 with 85% 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:

56 000 Ordinary A shares @ $2.50, fully paid $140 000

15 000 Ordinary B shares @ $1.50, paid to 80c 12 000

On 28 June 2013, the directors declared a 6c 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 75 000 ordinary shares of $2.30 each, fully paid. On 17 February 2013 the directors offered these shareholders the right to acquire one new share for each three held at a price of $3 40 each, payable on acceptance. The offer closed on 17 March 2013 by which date acceptances had been received from all shareholders. The new shares were allotted on that day.

Required

Prepare journal entries to record the above events. Show all workings (2 marks)

7. Bremer Bay 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...