Himalaya Ltd.’s reporting period is from 1 January to 31 December. Year 2022: At the beginning of the reporting period, it has $5 million of share capital and 1.5 million ordinary shares outstanding. On 1 April 2022, the company announces a bonus issue of 2 shares for every share held on that date. By the end of the year Himalaya Ltd.’s profit attributable to ordinary shareholders amounts to $5,250,000. Year 2023: Himalaya Ltd. needs to raise funds for expansion of its business. Ms. Natasha Romanoff, CEO and Mr. Clint Barton, CFO have decided to make a non-renounceable rights issue to existing shareholders of 250,000 new shares at an issue price of $20 per share. Goldman Sachs has agreed to fully underwrite the rights issue. Himalaya Ltd issued a prospectus on 1 February 2023 and applications closed on 3 April 2023. Costs associated with the rights issue and the eventual issue of the shares were $45,000. Required a) For year ending December 2022, calculate the 2022 basic earnings per share amounts that Himalaya Ltd. must disclose in its financial statements for the year ended 31 December 2022. b) For year ending December 2023: 1. Prepare the journal entries for the rights issue and the subsequent share issue made by Himalaya Ltd., assuming that 75% of the rights were exercised by the due date. 2. Prepare the journal entries assuming that the rights issue was not underwritten and that any unexercised rights lapsed.
Himalaya Ltd.’s reporting period is from 1 January to 31 December.
Year 2022:
At the beginning of the reporting period, it has $5 million of share capital and 1.5 million
ordinary shares outstanding. On 1 April 2022, the company announces a bonus issue of 2 shares
for every share held on that date. By the end of the year Himalaya Ltd.’s profit attributable to
ordinary shareholders amounts to $5,250,000.
Year 2023:
Himalaya Ltd. needs to raise funds for expansion of its business. Ms. Natasha Romanoff, CEO
and Mr. Clint Barton, CFO have decided to make a non-renounceable rights issue to existing
shareholders of 250,000 new shares at an issue price of $20 per share.
Goldman Sachs has agreed to fully underwrite the rights issue. Himalaya Ltd issued a
prospectus on 1 February 2023 and applications closed on 3 April 2023. Costs associated with
the rights issue and the eventual issue of the shares were $45,000.
Required
a) For year ending December 2022, calculate the 2022 basic earnings per share amounts that
Himalaya Ltd. must disclose in its financial statements for the year ended 31 December 2022.
b) For year ending December 2023:
1. Prepare the
Himalaya Ltd., assuming that 75% of the rights were exercised by the due date.
2. Prepare the journal entries assuming that the rights issue was not underwritten and that
any unexercised rights lapsed.
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