Tesco Oil Company is a SAOG (The Company is registered in the Sultanate of Omam public joint stock company and is primarily engaged in the marketing and distribution of petroleum products and blending of lubricants. The Company has its primary listing on the Muscat Securities Market

The Company's principal activity is manufacturing and selling Fuel lubricants and petroleum products Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer

For the year 2020 the company had evaluated the following Opportunities and Threats:

Opportunities The Retail Business sustained its market leader position with prior year investments in sex sites and upgrades to existing sites together with continuous improvement in customer experience helping it maintain its lead Onkey performance indicators such as Brand Share of Preference and High Quality Fuels perception Retail emerged as a leader in Oman as reported by the Global Retail Tracker an international market research exercise contacted by the Tesco ou Group. This was also reflected through being awarded Most Trusted Brand in the Fuel Station Category in 2019 in Oman

Threats:

The lubricants industry continued to be challenging as a result of the overall slowdown in the economy. Moreover, construction, and other B2B sectors, as well as distributors, face a stiff credit challenge due to cash flow restrictions

Also, the car franchise workshops continued to suffer from lower cars sales which have impacted the lubricants consumption in this sector. While these challenges impacted the lubricant's overall volume in the Sultanate, the business maintained its market leadership positions and was able to retain its key customers and winning new accounts

In order to provide its customers with convenient foeling locations across Oman the business contined with its multi-year investment programme where 12 new retail service stations were opened using the year, bringing the total to 200 service stations by the end of 2020. Additional service stations are still under construction In order to cope up with its additional fund requirements for such developments the company decided to call for rights issue to its existing shareholders. The details related to issue is as given below

• The issue period will be: Opening Date: 17th April 2020 Closing Date: 26 April 2020
• Rights Entitlement: Every shareholder as on the Record Date is entitled to about 17.7 Offer Shares for every 100 shares held as on the Record Date
• Eligibility for Subscription: Subscription for the Rights Issue is open to the Shareholders whose names appear in the Bank's shareholder register as on the Record Date Persons who purchase the rights on the MSM within the trading period of the Rights Issue are also eligible to subscribe for the Offer Shares before the Rights Issue closes. The eligibility to subscribe for Otter Shares shall lapse in case the Shareholder seither exercises his her right of subscription to the Rights Isses sells its nights on the MSM during the prescribed period
• Issue Price Baiza 582 per Offer Share, consisting of issue price 580 ples Baina 2 towards issue expenses payable in full on submission of Application Form

• Allotment and refunds would be within 3 days of the closure of the Rights Issue
• Estimated issue expenses. The issue expenses of the Rights Issue me estimated at RO 75,680. The issue expenses of the Rights Issue will be met from the amounts collected from Applicants at 2 baixa per

Offer Share and the remainder will be bome by the Bank. Any surplus of the collection towards Issue Expenses over the actual expenses incurred will be retained by the Bank and credited to company's legal reserve or a special reserve to be established pursuant to Article 126 of the CCL

The Financial Advisor & Issue Manager are Muscat Capital Markets SAOC Legal Advisor to the Issue A&D Law Firm and Statutory Auditor Emst & Young LLC

The authorized share capital of the Company consists of 678,000,000 shares of RO 0.300 each. The details of equity before the right issue is as follows:

- Share capital 18.621.513

- Legal reserve 1.125.220

-Retained earings 1.598,123

-Revaluation Reserve 145,800

-Investment fluctuation reserve 99,800

-General reserve 77,680

In total 20% shareholders rejected the right offer. Post right issue in pursuant with the provisions of Oman commercial law the company board also decided to come up with a bonus issue for its equity shareholders in the month of May 2020. The bonus share of the company can be issued when the articles of the association is authorized to issue the bonus shares. It is essential to know that if the articles of association do not permit to issue bonus shares, the company should pass a special resolution at the general meeting of the company. As part of the procedure, the company has checked the articles of association which allowed issue of bonus shares and the company confirmed enough authorized capital is available. It was accorded that a sum of RO 35,800 can be capitalized out of general reserve for bonus issue and set free for distribution amongst the equity shareholders as bonus. Each shareholder will be eligible for 1 share for every 65 shares held.

You are required:

a. The management has taken certain decisions in the given scenario. You are required to list them out and briefly state the impact of such decisions on the company? (3 marks - 150 words)

b. Pass necessary journal entries for the rights and bonus taking place in the given scenario. Ignore the entry for share issue expenses. (4 marks)

c. Prepare necessary abstract to represent such transactions in Statement of Financial Position. (3 marks)