Q.No. 5 ABC SAOG has in issue 10 million, RO 1 equity share. The company decided to make a bonus issue in the ratio of 2 for 10 shares held. Prior to issue of bonus the company had following balance in its reserves and surplus: Share premium RO 1,000,000, General Reserve RO 1,000,000, Retained earnings RO 5 million Revaluation surplus RO 2,500,000. The company has to use in priority share premium. 50% of General reserve and 10% of Retained earnings can be used for bonus shares. Journalize the entries and show its working and effect on items of Statement of Financial Position.

Q.No. 5 ABC SAOG has in issue 10 million, RO 1 equity share. The company decided to make a bonus issue in the ratio of 2 for 10 shares held. Prior to issue of bonus the company had following balance in its reserves and surplus: Share premium RO 1,000,000, General Reserve RO 1,000,000, Retained earnings RO 5 million Revaluation surplus RO 2,500,000. The company has to use in priority share premium. 50% of General reserve and 10% of Retained earnings can be used for bonus shares. Journalize the entries and show its working and effect on items of Statement of Financial Position.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 11PROB

See similar textbooks

Similar questions

XYZ SAOG has in issue 5 million, RO 1 equity share. The company decided to make a bonus issue in the ratio of 2 for 5 shares held. Prior to issue of bonus the company had Share premium of OMR 2,500,000. Which of the following journal entry is Correct in respect of issuing bonus shares? a. Debit Share premium OMR 2,000,000 Credit Share Capital OMR 2,000,000 b. Debit Share capital OMR 7,000,000 Credit Share premium OMR 7,000,000 c. Debit Share capital OMR 2,500,000 Credit Share premium OMR 2,500,000 d. Debit Share premium OMR 500,000 Credit Share Capital OMR 500,000
1. Avalanche Inc. revealed the following information for the year ended December 31. 2021 Preference share. P100 par-P2.4 million; Share premium, preference - P700,000; Ordinary share, P15 par-P3.5 million, Share premium, ordinary-P1.5 million. Subscribed ordinary share - P100,000, Retained earnings - P2 million, Subscription receivable, ordinary - P20,000 How much is the legal capital? A.P6 million B.PB 1 million CP5.9 million D.P8 2 million 2.At the beginning of 2021, DAI Corp. was organized with authorized capital of 200,000, P500 par value shares. The following transactions transpired during its first year of business. February 4- Issued 15.000 shares at P510 per share April 10- Issued 3,000 shares for services received (FMV of the services is P1.7 million). October 23-Issued 5,000 shares in exchange for a land (FMV) the land is P3 million) What amount should be reported as share premium? A.11.500.000 B. 23.000 C.850.000 D.12.350.000 3. At the beginning of 2021, DAI Corp. was…
9.3 YZA Ltd (all equity financed) has 24,000 £1 NV shares in issue; market capitalisation was £96000 when a 3:8 bonus issue was struck; The post bonus issue share price is nearest;
Q14 An entity issued 1 500 debentures with face value of R20 000 each. The coupon rate on the debentures is 12% paid annually in arrears. In order to speed the sale of the debentures, the directors decided to issue them at 10% discount. What amount would be recorded by the entity in its statement of financial position under non-current liabilities? Select one: a. R20 000 b. R15 000 000 c. R30 000 000 d. R27 000 000
Financial Management Question. QUESTION ONE You are provided with the following information relating to V ltd Equity and liabilities 12% debentures (shs1000 at par) 16,000 10% preferences shares 6,250 Ordinary shares (Shs 10 par) 12,500 Retained earnings 28,125 Additional information The debentures are currently selling at Shs 950 in the market Company paid a dividend of Shs 5.00 per ordinary share and they are expected to grow at a rate of 10% per annum. The corporation tax is 40% Required Effective Cost of debt Cost of equity Weighted Average cost of capital
13 - On 04.05.2020, our enterprise sold 1,000 of the shares of Kardemir A.Ş., which it had purchased for a temporary investment of 12 TL, for 15 TL each, and after paying a commission of 250 TL to the relevant bank, the remaining amount was deposited into the bank account of the enterprise. Which of the following calculations is incorrect? a) 653 Commission Expenses Hs. 250 TL Borrowed B) 110 Stocks Hs. 12.000 TL Creditor NS) 655 Securities Sales Profits Hs. 3.000 TL Creditor D) 102 Banks Hs. 14.750 TL Debtor TO) 645 Securities Sales Profits Hs. 3.000 TL Debtor
13. The following data were available for the portfolio of investment in stocks during 20X2: Cost Fair value (12/31/20X1) Fair Value (12/31/20X2) ABC 100,000 80,000 110,000 LMN 80,000 30,000 40,000 QRS 60,000 70,000 60,000 All the shares of ABC were sold on January 20X3 for P41,200 and incurred P1,200 transaction costs. What is the amount of gain (loss) on Dec 31, 20X1, Dec 31, 20X2 and Jan 20X3 respectively? (60,000); 30,000 ; (70,000) (60,000); (30,000); (20,000) (60,000); 30,000; (60,000) (60,000); 30,000; 30,000
2. Akea Corp., reports this journal entry on May 15, 2020: Cash 75,000 Ordinary Share Capital 63,000 Paid in Capital in Excess of Par 12,000 The explanation reads. “Issued ordinary share capital for P50 per share”. What is the par value per share for this transaction?
Question 1On 1st January 2021, Nkana Plc issued 80 million K1 preferred shares at a premium of K0.5 each. Issue Costs totalled K1.5 million. The shares carry a fixed dividend of 6%. The dividend is paid annually in arrears on the 31st of December. The shares will be redeemed on 1st January 2026 at a premium of K73.6m. The effective rate of interest on these shares is 9%.Required:Show how these shares will be reported in the financial Statements of Nkana plc for the years 2021 to 2025. Nkana plc’s year-end is 31st December.
Assumptions: (a) Mr. X has a limited cash balance of P1,000,000.00. (b) The buying price of the stock is P10 per share (c) Mr. X wants to purchase 150,000 shares (d) The broker wants to lend Mr. X the deficit in exchange of 3% simple interest per month. (e) the transaction cost in buying the shares is 0.10 per share Variable rate plus P20,000 Fixed rate. (f) On September 1, 2021, Mr. X purchased 150,000 shares at 10 per share Using the above details, Assuming on October 1, 2021, Mr. X wants to sell the 150,000 shares to Mr. Y for 10.10 per share with a corresponding transaction cost of 0.05 per share Variable Rate plus P10,000 Fixed rate. What is the net income/loss of Mr. X in selling the stocks to Mr. Y? If you were the Financial Advisor of Mr. X, would you advise him to sell the stocks to Mr. Y? Why or why not?
Assumptions: (a) Mr. X has a limited cash balance of P1,000,000.00. (b) The buying price of the stock is P10 per share (c) Mr. X wants to purchase 150,000 shares (d) The broker wants to lend Mr. X the deficit in exchange of 3% simple interest per month. (e) the transaction cost in buying the shares is 0.10 per share Variable rate plus P20,000 Fixed rate. (f) On September 1, 2021, Mr. X purchased 150,000 shares at 10 per share Using the above details, Assuming on October 1, 2021, Mr. X wants to sell the 150,000 shares to Mr. Y for 10.90 per share with a corresponding transaction cost of 0.05 per share Variable Rate plus P10,000 Fixed rate. What is the net income/loss of Mr. X in selling the stocks to Mr. Y after deducting transaction costs and interest payment to the broker? If you were the Financial Advisor of Mr. X, would you advise him to sell the stocks to Mr. Y? Why or why not?
20.Corridor Company issued 6,000 share of its P100 par ordinary share to Max Las compensation for 1,000 hours of legal services performed, Max L usually bills P500 per hour for legal services. On this date of issuance, the share was selling at a public trading at P150 per share. By what amount should the share premium account of Corridor Company increase as a result of the issuance of those shares? A. P3,000,000 B. P600,000 C. P300.000 D. P900,000 The Magic Lamp Corporation was incorporated on January 1, 2021, with the following authorized capitalization: 40,000 ordinary shares, no par value, stated value P40 per share 10,000 shares of 5% cumulative preference share, par value P10 per share During 2021, Magic Lamp issued 24,000 ordinary share for a total of P1,200,000 and 6,000 preference share at P16 per share, In addition, on December 31, 2021, subscriptions for 2,000 preference shares were taken at a purchase price of P17. These subscribed share were paid for on January 2. 2022.…