On 1 January 20x0, the company was incorporated with an authorised share capital of 150 000 ordinary

Question:

On 1 January 20x0, the company was incorporated with an authorised share capital of 150 000 ordinary shares and 50 000 preference shares (fixed annual dividend of 10c/share).

The post-closing trial balance of Coral Limited as at 31 December 20x2 after the provisional statement of profit or loss & other comprehensive income was drafted is shown.

Additional information:

The directors decided, with the necessary general meeting approval, to implement these decisions on 1 January 20x3 in this order:

1. The authorised share capital must be converted to 150 000 ordinary shares @ no par value.

2. The preference shares are to be redeemed at a premium of 5c/share.

3. The redemption of the preference shares must be financed partly from the issue of 10 000 ordinary shares @ R2/share and partly out of the current bank balance.

4. The ordinary shares were offered to the public.

– The issue was underwritten in full by Down-Under Ltd for an underwriting commission of 6%.

– The public subscribed for 8 000 shares.

– All the shares were allotted on 1 January 20x3.

– Share issue expenses amounted to R500.

5. The directors wish to write off all commission and share issue expenses immediately after the redemption of the preference shares.

6. Subsequent to the above transactions, there must be a capitalisation issue of one ordinary share for every eight already held at the current market price of R2.00/share.

You are required to:

1. Show the general journal entries for the decisions on 1 January 20x3. (Ignore dividend tax.)

2. Draw up the equity and liabilities section of the statement of financial position of Coral Ltd on 1 January 20x3, in compliance with the Companies Act 71 of 2008 and International Financial Reporting Standards (IFRS) after having made all the above adjustments.

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