Issue of Shares and Debentures for Consideration Other Than Cash

The video tutorial explains the accounting treatment for issuing shares or debentures for non-cash consideration, using a case study of X Limited and Z Limited. It covers the journal entries required for such transactions, including scenarios involving capital reserves and discounted issuance. The session concludes by affirming that the accounting treatment remains consistent whether shares or debentures are issued.

What is the main reason a company might issue shares or debentures instead of cash?

• To avoid paying taxes

• To save on transaction fees

• Due to insufficient cash reserves

• To increase their stock price

What does issuing shares for consideration other than cash typically involve?

• Paying in foreign currency

• Exchanging shares for goods or services

• Paying in cryptocurrency

• Issuing shares at a higher interest rate

Why might X Limited pay more than the net asset value when acquiring Z Limited?

• To cover legal fees

• To account for Z Limited's goodwill

• To secure a long-term contract

• To avoid competition

In the example provided, what is the purpose of the capital reserve?

• To record a capital loss

• To adjust for currency fluctuations

• To account for excess payment over net assets

• To record a capital profit

How is the issue price of shares calculated when issued at a premium?

• Face value plus premium

• Face value minus premium

• Face value times premium

• Face value divided by premium

What happens to the accounting treatment if shares are issued at a discount?

• It remains the same as at par

• It includes a discount account

• It requires a higher face value

• It involves a different currency

If a company issues debentures instead of shares, what changes in the accounting treatment?

• A new account is created for debentures

• The face value is recalculated

• The treatment remains the same, only the terminology changes

• The interest rate is adjusted