A Ltd 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 $2020$:

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 Ltd$.$

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

$2021$:

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 $1\%.$ REQUIRED:

QUESTION $1$

$[30$ MARKS$]$

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

$(3)$

$1\mathrm{.}2$ Prepare the joumals to recognize 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 joumal narrations are required.

$1\mathrm{.}3$ Calculate the earnings per share for the Class A shares of Adidas Ltd 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 statements of Adidas

Ltd for the stated reporting periods in terms of IFRS.

Please note:

Show all calculations clearly as marks are awarded for them.

The reconciliation of earnings as part of the note is not required