A LId is listed on the Johannesburg Stock Exchange $($JSE$)$ in the retail sector. The following information is presented to you: The share capital of Adidas Ltd was as follows on $1$ January $2020.$

$\backslash$table$[[,\backslash$table$[[$Authorised$],[$number of shares$]],\backslash$table$[[$Issued$],[$number of shares$]],$R$],[$Class A shares,$5000000,2800000,22400000],[$Class B shares,$500000,500000,5000000],[$Class C shares,$200000,100000,2000000],[$Class D shares,$100000,100000,10000000]]$

The Class A shares have voting rights and Adidas Ltd has no obligation to repay the capital on these shares. Class A shareholders will only be entitled to a dividend once declared by the directors of Adidas Lid.

The Class B shares are non$-$redeemable shares. Shareholders of Class B shares are entitled to a $6\%$ dividend $($on issue price$)$ before Class A shareholders.

The Class $C$ shares are non$-$cumulative non$-$redeemable shares. Shareholders of Class $C$ shares have a right to receive a dividend of $7\%$ of the issue price at $31$ December every year, but only once declared by the Board of directors.

The Class D shares are redeemable preference shares that are entitled to a $7\mathrm{.}5\%$ dividend. The Class $D$ shares were issued on $1$ April $2015$ and are redeemable at the option of the holders on $1$ April $2025.$

Adidas Ltd experienced liquidity problems during the reporting period ended $31$ December $2020$ even though the company made a profit, therefore no dividends were paid for that period. The following dividends were paid during the year ended $31$ December $2021$:

$\backslash$table$[[,\backslash$table$[[$Dividend paid during$],[$reporting period$],[$ended $31$ December $2021],[$R$]],\backslash$table$[[$Dividend paid during$],[$reporting period$],[$ended $31$ December $2020],[$R$]]],[$Class A shares,$1540000,-],[$Class B shares,$600000,-],[$Class C shares,$140000,-],[$Class D shares,$750000,-],[$Total dividends paid,R$3030000,]]$

ADDITIONAL INFORMATION:

a$.$ On $20$ February $2021$ the company announced a rights issue of four Class A share for every seven Class A shares held at R$7,75$ per share in an attempt to raise additional capital. The rights were offered to shareholders registered on $1$ March $2021$ and the closing date of the rights offer was $15$ March $2021,$ with a share certificate issue date of $1$ April $2021.$

Finance bank undertook to take up any unsubscribed rights within seven days of the closing date and underwrote the rights offer at a commission of $1\%.$

$\frac{1}{2}$

Adidas $($td received applications amounting to R$9300000($Ior $1200000$ shargs$)$ Sharg issue costs $($grcluding underwrter s commission$)$ totalled R$76000$

The drectors have concluded that this offer does not include a bonus$-$element for IA$833$ Earnings per share purpoces.

b An extract of the retained earnings as presented in the Statement of changes of equity of A Ltd for the year ended $31$ December $2021$ is as follows:

$\backslash$table$[[,\backslash$table$[[$Retained$],[$earnings$],[$R$]]],[$Balance as at $1$ January $2020,4660000],[\backslash$table$[[$Total dividends paid$],[$Total comprehensive income for the year $*]],\backslash$table$[[\backslash$table$[[(-)],[5340000]]]]],[$Balance as at $31$ December $2020,10000000],[\backslash$table$[[$Total dividends paid$],[$Tolal comprehensive income for the year $*]],\backslash$table$[[\backslash$table$[[(2280000)],[8440000]]]]],[$Balance at $31$ December $2021,16160000],[-$ Total comprehensive income equals profit after taxation$]]$

REQUIRED:

QUESTION $1$

$[30$

MARKS$]$

$1\mathrm{.}1$ Which class$/($es$)$ of shares does$/($do$)$ not represent equity in the records of Adidas LId? Explain why you are of this opinion.

$1\mathrm{.}2$ Prepare the journals to recognise the rights issue of the Class A shares for the year ended $31$ December $2021$ as it should have been done in the books of Adidas Ltd$.$ Short journal narrations are required.

$(12)$

$1\mathrm{.}3$ Calculate the earnings per share for the Class A shares of Adidas LId for the reporting periods ended $31$ December $2020$ and $31$ December $2021$ in terms of IAS $33$ Earnings per share.

Prepare only the narrative part of the note for earnings per share as it should be disclosed in the financial

$(15)$

statements of Adidas LId for the stated reporting periods in terms of IFRS.