QUESTION 2: Accounting for Equity (20 Marks) The share capital of RUBER Ltd on 30 June 2020 was: Share capital: 250,000 'A' ordinary shares issued at $7.00 paid to $4.00 100,000 'B' ordinary shares issued at $5, fully paid $1,000,000 $500,000 $1,500,000 REQUIRED: a) Prepare journal entries to record the following transactions in the records of RUBER Ltd (18 marks): 01 Nov 2020 The company makes a 1-for-5 rights offer to its 'B' ordinary shareholders. The rights are renounceable and allow holders to obtain 'B' ordinary shares for $3.50 per share, payable in full on application. 30 Nov 2020 The holders of 60 000 'B' ordinary shares accept the rights offer by the expiry date. The shares are duly allotted and all money is received. 16 Jan 2021 A call of $3.00 per share is made on all 'A' ordinary shares. All call money except that owing by the holder of 15 000 shares is received by 31 January 05 Feb 2021 Shares on which calls are unpaid are forfeited and cancelled, as per the company's constitution. 17 Mar 2021 To assist with cash flow difficulties, the company issued a prospectus inviting offers for 150 000 options to acquire 'A' ordinary shares at an issue price of $2.00 per option, payable in full on application. Each option, exercisable on 31 December 2020, allows the holder to acquire one 'A' ordinary share for $4.50. 31 Mar 2021 Offers had been received for 120 000 options and these were duly allotted. 31 Dec 2021 The holders of 110 000 options exercised their options and 110 000 'A' ordinary shares were allotted. The remaining options lapsed. All money was received. Costs of issuing the shares. $12 000, were paid on 31 January 2022 QUESTION 2: Accounting for Equity (20 Marks) The share capital of RUBER Ltd on 30 June 2020 was: Share capital: 250,000 'A' ordinary shares issued at $7.00 paid to $4.00 100,000 'B' ordinary shares issued at $5, fully paid $1,000,000 $500,000 $1,500,000 REQUIRED: a) Prepare journal entries to record the following transactions in the records of RUBER Ltd (18 marks): 01 Nov 2020 The company makes a 1-for-5 rights offer to its 'B' ordinary shareholders. The rights are renounceable and allow holders to obtain 'B' ordinary shares for $3.50 per share, payable in full on application. 30 Nov 2020 The holders of 60 000 'B' ordinary shares accept the rights offer by the expiry date. The shares are duly allotted and all money is received. 16 Jan 2021 A call of $3.00 per share is made on all 'A' ordinary shares. All call money except that owing by the holder of 15 000 shares is received by 31 January 05 Feb 2021 Shares on which calls are unpaid are forfeited and cancelled, as per the company's constitution. 17 Mar 2021 To assist with cash flow difficulties, the company issued a prospectus inviting offers for 150 000 options to acquire 'A' ordinary shares at an issue price of $2.00 per option, payable in full on application. Each option, exercisable on 31 December 2020, allows the holder to acquire one 'A' ordinary share for $4.50. 31 Mar 2021 Offers had been received for 120 000 options and these were duly allotted. 31 Dec 2021 The holders of 110 000 options exercised their options and 110 000 'A' ordinary shares were allotted. The remaining options lapsed. All money was received. Costs of issuing the shares. $12 000, were paid on 31 January 2022
