Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Rights issue The company is planning a big expansion project and requires capital to fund this planned expansion. The directors decided to source the funding
Rights issue
The company is planning a big expansion project and requires capital to fund this
planned expansion. The directors decided to source the funding by announcing a
rights offer to all the companys existing shareholders. The rights offer will be done at
one share for every five shares held and these shares are offered at R per share.
The company announced the rights offer on June and the closing date was
June On the closing date of the rights offer, EAD Pty Ltd received a total of
share applications from the public. The shares in terms of the rights offer were
issued on July and the share issue cost amounted to R
The directors further decided to underwrite the rights offer, the underwriting was done
by CBC Bank at an underwriters commission of CBC Bank will take up all shares
not subscribed for by the public.
All amounts relating to the rights offer were received on the closing date, June
All costs relating to the right issue were paid in cash on July
On February EAD Pty Ltd had an issued share capital of shares
at R each, which were issued at incorporation of the company. The current rights
issue is the first new shares that will be issued other than the shares issued at
incorporation.
Dividends
EAD Pty Ltd declared a dividend on February EAD Pty Ltd gave the
shareholders the option to receive either one new share worth R each or the cash
equivalent thereof. On the declaration date, the directors of EAD Pty Ltd estimated
that of the shareholders would elect the share option.
The dividends were paid on March
ANNEXURE I: FORMATIVE ASSESSMENT
HFACJanJunFACPV
REQUIRED:
With reference to the information under Rights issue, prepare the general
journal entries to account for the rights issue in the records of EAD Pty Ltd for
the March financial year.
Journal dates are required.
Journal narrations are not required.
All amounts should be rounded to the nearest Rand.
Show all calculations and references clearly.
marks
With reference to the information under Dividends, assume that only of
the shareholders elected the share option on the dividend payment date.
Prepare the general journal entries to account for the dividends declared on
February as well as the payment on March Note: Ensure to
take into consideration the shares in terms of the rights issue.
marks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started