Limited Company Simple Share Issue

Which items may be recorded in a Statement of Changes in Equity?

1 issue of debentures

2 profit for the year

3 proposed dividends

• 1 and 2

• 1 only

• 2 and 3

• 2 only

The equity of a company included the following:

$

ordinary shares of $1 each 1 500 000

share premium account 600 000

The market price of one share was $1.50.

The company made a fully subscribed rights issue of 500 000 ordinary shares at $1.20 per share.

What was the balance on the ordinary share capital account and share premium account after the issue?

• ordinary share capital account $2 000 000

  share premium account $700 000

• ordinary share capital account $2 000 000

  share premium account $850 000

• ordinary share capital account $2 100 000

  share premium account $600 000

• ordinary share capital account $2 250 000

  share premium account $600 000

On 1 January a company’s equity included 100 000 $1 ordinary shares.

The directors of the company then did the following:

1 March Made a rights issue of 20 000 ordinary shares at $1.25 each. The rights issue was fully subscribed.

1 June Made a bonus issue of 5000 ordinary shares.

1 July Paid an interim dividend of $0.10 on all of the shares in issue at that date.

By how much did the bank account increase as a result of these transactions?

• $12 500

• $17 500

• $30 000

• $37 000

The following balances are extracted from the books of J Limited.

How many ordinary shares have been issued during the year ended 30 April 2019?

• 200 000

• 240 000

• 400 000

• 480 000

What was the premium per share on the share issue?

• $0.05

• $0.10

• $0.15

• $0.40

A company issued $1 ordinary shares for $1.20 each. The total proceeds were recorded in the ordinary share capital account.

Which journal entry completes the entries for the share issue?

• account to debit suspense

  account to credit ordinary share capital

• account to debit ordinary share capital

  account to credit suspense

• account to debit ordinary share capital

  account to credit share premium

• account to debit share premium

  account to credit ordinary share capital

An extract from a company’s statement of financial position showed the following information.

The directors have agreed to make a bonus issue of 3 ordinary shares for 4 shares held. They

wish to maintain reserves in their most flexible form.

Which debit entry should be made in the retained earnings account?

• $150 000

• $750 000

• $900 000

• $1 500 000

A company issues 500 000 $1 ordinary shares for $3 each and $250 000 debentures of 6%.

By which amount will the net assets of the company increase?

• $750 000

• $1 250 000

• $1 500 000

• $1 750 000

A company has a bank balance of $20 000.

The company’s equity and reserves are shown.

The directors wish to pay the maximum dividend possible.

How much of the bank balance will be used to pay the dividend?

• $3000

• $5000

• $8000

• $20 000

Which statement about rights issues is true?

• Shares can be sold to anyone.

• Shares can only be offered to existing shareholders.

• Shares cannot be sold at a premium.

• Shares cannot be sold at less than the market price.