Hi there. I need help with these questions. Answers have to be one hundred words or more.

QUESTION 1:

Do you think that a reporting entity would prefer to classify a financial instrument as debt or equity? Why?

QUESTION 2:

Wedding Cake Ltd has its shares listed on a securities exchange. It has entered a contractual agreement to issue $10 million of its ordinary shares to Island Ltd in two years' time. The number of shares to be ultimately issued will depend on the market price of the shares in two years' time.

Should Wedding Cake Ltd recognise a financial liability, or an equity instrument, in relation to this agreement?

QUESTION 3:

Arthur Ltd has the following statement of financial position