Question $3$

$(25$ Marks$)$

Delta Limited is a company listed on the Namibian Stock exchange; It is undergoing internal restructuring of its operations and needs to raise capital for this purpose. This can be done by issuing equity shares, preference shares and$/$or debentures to the public. The company has $31$ March as the year end.

Authorised capital:

Ordinary equity shares $20000000$ with par value of $N$$$2\mathrm{.}50$ per share.

$15\%$ Preference shares $2000000$ with par value of $N$$$2$ per share.

Issued capital:

Ordinary equity shares $8000000$

$15\%$ Preference shares Nil

Some of the balances on $01$ April $2022$ were as follows:

Retained earnings: N$$5556080$

Share premium: $,N$$$2400000$

Preliminary expenses: $N$$$25500$

The transaction during the period:

On $1$ May $2022$ the directors of Delta Limited decided to issue $4500000$ shares of the remaining authorised shares. InnerCore Underwriters guaranteed the issue in return for $2\mathrm{.}5\%$ underwriting commission. These shares would be offered at $N$$$3$ per share.

On $31$ July $2022,$ the closing date for the application, $N$$$15000000$ had been received from applicants for ordinary shares. The maximum number of shares was duly allotted on $31$ August $2022$ and InnerCore underwriters was paid. The accounting policy of the business is to maximize distributable reserves whenever it writes off preliminary and related other expenditure. Flotations cost amounting N$$18500$ were paid.

An issue of $300000,15\%$ preference shares was made and all the shares were taken up immediately on $31$ August $2022$ at par. This was the first issue of this class of shares with dividend payable annually on $28$ February every year, if declared. This issue was however, not underwritten as the subscribers were institutional investors who had declared interest to take the shares.

On $15$ September $2022$ Delta Limited's board of directors decided to distribute profits. It was proposed that to offer ordinary shareholders a dividend of $N$$$0\mathrm{.}15$ per share including new shareholders. This was paid on $30$ September $2022.$

Delta made a profit of N$$6750255$ for the year ended $31$ March $2023$ before taking into account any of the information provided above. The directors decided to write off the preliminary and flotation expenses.

YOU ARE REQUIRED TO:

Journalise the above transactions. Narrations are not required. $(20$ marks$)$

Prepare an extract of statement of changes in equity showing retained earnings column only. $(5$ marks$)$