Question 5 (25 Marks)

Thando Limited was incorporated during 2021: Preliminary costs (legal costs incurred in connection with the start-up of the company) of R10 000 were paid on 2 January 2021. 2 000 ordinary no par value shares were issued at R100 each on 5 January 2021. Share issue costs of R2 000 were paid on 5 January 2021. On 15 January 2021, 500 of these shares were converted into 12% preference share equity. The draft statement of comprehensive income for 2021, before processing any adjustments for the above transactions, reflected total comprehensive income for 2021 of R120 000 (components of other comprehensive income: R 0).

Required:

Process journals to account for the preliminary costs, share issue and the related share issue costs. (10 Marks)

Disclose this in the statement of changes in equity for the year ended 31 December 2021. (15 Marks)