ADDITIONAL INFORMATION: 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 $1\%.$ Adidas Ltd received applications amounting to R$9300000($for $1200000$ shares$).$ Share issue costs $($excluding

underwriter's commission$)$ totalled R$76000.$

The directors have concluded that this offer does not include a bonus$-$element for IAS $33$ Earnings per share purposes.

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:REQUIRED:

QUESTION $1$

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

are of this opinion.

$1\mathrm{.}2$ 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.

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 $1\%.$