Question 1

The statement of changes in equity:

Accepted Answer

A) presents, either on the face of the statement or in the notes, the amounts of dividends recognised as distributions to owners during the period and the related amount per share. 
B) is identical to the statement of recognised income and expense. 
C) is the same as that required under the former UK 'Reconciliation of Shareholders Funds' statement. 
D) provides a reconciliation between the expenses outstanding at the start of the period and those outstanding at the end of the period. 
A) presents, either on the face of the statement or in the notes, the amounts of dividends recognised as distributions to owners during the period and the related amount per share. 
B) is identical to the statement of recognised income and expense. 
C) is the same as that required under the former UK 'Reconciliation of Shareholders Funds' statement. 
D) provides a reconciliation between the expenses outstanding at the start of the period and those outstanding at the end of the period.

Question 2

Motion Plc issued €5 million in redeemable preference shares in a private placement on 1 July 2012.The shares are redeemable on 30 June 2016,have no voting rights and offer a fixed rate of return to the holder.The shares are redeemed as expected with a fresh issue of shares.What are the accounting entries and note disclosures to record the transactions on 1 July 2012 and 30 June 2016?

Accepted Answer

A)  $\text { 1 July 2012: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Bank trust } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline
\end{array}$

$30 \text { June 2016: }$ 
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares have characteristics different to ordinary shares and so have been disclosed separately in the shareholders' funds section of the statement of financial position. 
B)  $\text {  July 2012: }$
$\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Application } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \
\hline \mathrm{Cr} & \text { Application } & & 5000000 \
\hline
\end{array}$

$30 \text { June 2016: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares have characteristics different to ordinary shares and so have been disclosed separately in the shareholders' funds section of the statement of financial position. 
C)  $\text { I July 2012: }$
$\begin{array}{|l|l|r|l|}
\hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline
\end{array}$

$30 \text { June 2016: }$
$\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cash } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares have the characteristics of debt and so have been classified as liabilities in the statement of financial position. 
D)  $\text { 1 July 2012: }$
$\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline
\end{array}$

$30 \text { June 2016: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Capital redemption reserve } & & 5000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Capital redemption reserve } & 5000000 & \
\hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares are to be redeemed on 30 June 2008. 
A)  $\text { 1 July 2012: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Bank trust } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline
\end{array}$

$30 \text { June 2016: }$ 
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares have characteristics different to ordinary shares and so have been disclosed separately in the shareholders' funds section of the statement of financial position. 
B)  $\text {  July 2012: }$
$\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Application } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \
\hline \mathrm{Cr} & \text { Application } & & 5000000 \
\hline
\end{array}$

$30 \text { June 2016: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares have characteristics different to ordinary shares and so have been disclosed separately in the shareholders' funds section of the statement of financial position. 
C)  $\text { I July 2012: }$
$\begin{array}{|l|l|r|l|}
\hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline
\end{array}$

$30 \text { June 2016: }$
$\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cash } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares have the characteristics of debt and so have been classified as liabilities in the statement of financial position. 
D)  $\text { 1 July 2012: }$
$\begin{array}{|c|l|r|r|}
\hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \
\hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \
\hline & & & \
\hline
\end{array}$

$30 \text { June 2016: }$
$\begin{array}{|l|l|r|r|}
\hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \
\hline \mathrm{Cr} & \text { Capital redemption reserve } & & 5000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Capital redemption reserve } & 5000000 & \
\hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \
\hline
\end{array}$ Note disclosure: redeemable preference shares are to be redeemed on 30 June 2008.

Question 3

Giggles Plc has 2 million shares issued.The directors have elected,with the support of a resolution passed at a general meeting,to undertake a 1: 2 share split so that there will be 4 million issued shares.The shares were originally issued at a price of €2 each.What is the summary entry to record the share split?

Accepted Answer

A)  $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Retained profits } & 1,000,000 & \
\hline \mathrm { Cr } & \text { Share capital-ordinary shares } & & 1,000,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Retained profits } & 2,000,000 & \
\hline \mathrm { Cr } & \text { Share capital-ordinary shares } & & 2,000,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 2000000 & \
\hline \mathrm { Cr } & \text { Share capital-ordinary shares } & & 2000000 \
\hline
\end{array}$$ 
D) None of the given answers are correct. 
A)  $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Retained profits } & 1,000,000 & \
\hline \mathrm { Cr } & \text { Share capital-ordinary shares } & & 1,000,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Retained profits } & 2,000,000 & \
\hline \mathrm { Cr } & \text { Share capital-ordinary shares } & & 2,000,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | } 
\hline \mathrm { Dr } & \text { Cash at bank } & 2000000 & \
\hline \mathrm { Cr } & \text { Share capital-ordinary shares } & & 2000000 \
\hline
\end{array}$$ 
D) None of the given answers are correct.

Question 4

Which of the following share issue costs does not qualify as a deduction from share capital?

Accepted Answer

A) advertising of share issue 
B) costs of prospectus issue 
C) administration overheads 
D) audit expenses associated with the issue of a prospectus 
A) advertising of share issue 
B) costs of prospectus issue 
C) administration overheads 
D) audit expenses associated with the issue of a prospectus

Question 5

IAS 1 Presentation of Financial Statements requires an entity to disclose a description of the nature and purpose of each reserve within equity.

Accepted Answer

A) True 
 B)False

Question 6

In a public issue of shares,the procedure to be adopted in the case of an oversubscription is normally specified in the prospectus.

Accepted Answer

A) True 
 B)False

Question 7

The owners' equity of an organisation is the same as the shareholders' funds of a company.

Accepted Answer

A) True 
 B)False

Question 8

Explain the differences between a rights issue and share options.

Accepted Answer

A rights issue generally involves provid

Question 9

Sundowner Plc called for subscriptions for 2 million shares.The issue price per share is £6.00 to be paid in three parts: the first payment of $3.00 is to be made on application,£2.00 is to be paid within 1 month of allotment and the remaining £1.00 is to be paid within 6 months of allotment.At the end of July,when applications close,applications for 5 million shares have been received.Two million share applicants were unsuccessful,while the remaining 3 million applicants were allotted shares on 1 August on a pro rata basis with the excess application money to be applied against the amount due on allotment.The first and final call on the shares is made on 1October.Assume all amounts on allotment and call are paid by the due date.What are the accounting entries to record these events?

Accepted Answer

A)  \(\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|l|l|l|l|}
\hline \mathrm{Dr} & \text { Application } & 15000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 15000000 \
\hline & & & \
\hline {\text { August: }} & & \
\hline & & & \
\hline \mathrm{Dr} & \text { Allotment } & 4000000 & \
\hline \mathrm{Cr} & \text { Application } & & 4000000 \
\hline\
\hline \mathrm{Dr} & \text { Share capital } & 6000000 & \
\hline \mathrm{Cr} & \text { Application } & & 6000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Allotment } & 3000000 & \
\hline \mathrm{Cr} & \text { Application } & & 3000000 \
\hline\
\hline \mathrm{Dr} & \text { Cash at bank } & 15000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 15000000 \
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Allotment } & 1000000 & \
\hline \mathrm{Cr} & \text { Application } & & 1000000 \
\hline\
\hline \text { Entry for1 October: }\
\hline \mathrm{Dr} & \text { Call } & 2000000 & \
\hline \mathrm{Cr} & \text { Application } & & 2000000 \
\hline\
\hline{\text { Summary entry for October: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 2000000 & \
\hline \mathrm{Cr} & \text { Call } & & 2000000 \
\hline
\end{array}
\end{array}\) 
B)    
C)    
D)    
A)  \(\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|l|l|l|l|}
\hline \mathrm{Dr} & \text { Application } & 15000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 15000000 \
\hline & & & \
\hline {\text { August: }} & & \
\hline & & & \
\hline \mathrm{Dr} & \text { Allotment } & 4000000 & \
\hline \mathrm{Cr} & \text { Application } & & 4000000 \
\hline\
\hline \mathrm{Dr} & \text { Share capital } & 6000000 & \
\hline \mathrm{Cr} & \text { Application } & & 6000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Allotment } & 3000000 & \
\hline \mathrm{Cr} & \text { Application } & & 3000000 \
\hline\
\hline \mathrm{Dr} & \text { Cash at bank } & 15000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 15000000 \
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Allotment } & 1000000 & \
\hline \mathrm{Cr} & \text { Application } & & 1000000 \
\hline\
\hline \text { Entry for1 October: }\
\hline \mathrm{Dr} & \text { Call } & 2000000 & \
\hline \mathrm{Cr} & \text { Application } & & 2000000 \
\hline\
\hline{\text { Summary entry for October: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 2000000 & \
\hline \mathrm{Cr} & \text { Call } & & 2000000 \
\hline
\end{array}
\end{array}\) 
B)    
C)    
D)

Question 10

When a company redeems preference shares:

Accepted Answer

A) It must ensure it has sufficient cash reserves to do so. 
B) It must do so out of profits other than those available for the issuing of dividends. 
C) It must issue fresh shares to fund the redemption. 
D) None of the given answers are correct. 
A) It must ensure it has sufficient cash reserves to do so. 
B) It must do so out of profits other than those available for the issuing of dividends. 
C) It must issue fresh shares to fund the redemption. 
D) None of the given answers are correct.

Question 11

Fraser Plc issued 10 million shares at a price of €3 on 1 July 2012.The subscribers are required to pay €1 on application,€1 on allotment and the balance on call to be announced at a later date.The share issue was oversubscribed by 2 million shares.On 1 August 2012 the shares were allotted to all subscribers on a pro rata basis.What is the balance of the 'allotment account' and 'share capital' for this share issue on 1 August 2012,respectively?

Accepted Answer

A) €8 million; €20 million 
B) €8 million; €30 million 
C) €10 million; €20 million 
D) €10 million; €30 million 
A) €8 million; €20 million 
B) €8 million; €30 million 
C) €10 million; €20 million 
D) €10 million; €30 million

Question 12

Signal Plc called for subscriptions for 8 million shares.The issue price per share is €3.50 to be paid in three parts: the first payment of €1.00 is to be made on application,€1.50 is to be paid within 1 month of allotment and the remaining €1.00 is to be paid within 3 months of allotment.At the end of July,when applications close,applications for 10 million shares have been received.The shares are allotted on 1 August on a pro rata basis with the excess application money to be applied against the amount due on allotment.The first and final call on the shares is made on 1 October.Assume all amounts on allotment and call are paid by the due date.What are the accounting entries to record these events?

Accepted Answer

A)  $\begin{array}{|c|l|l|l|}
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 10000000 \
\hline & & &\
\hline{\text {1 August: }} & & \
\hline \mathrm{Dr} & \text { Application } & 8000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 8000000 \
\hline & & &\
\hline \mathrm{Dr} & \text { Allotment } &  12000000& \
\hline \mathrm{Cr} & \text { Share capital } &  & 12000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Application } &2000000 & \
\hline \mathrm{Cr} & \text { Allotment } &  &2000000 \
\hline\
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Application } & & 10000000 \
\hline & & & \
\hline \text { Entry for } 1 \text { October: } & & \
\hline \mathrm{Dr} & \text { Call } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline
\end{array}$ 
B)  $\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|c|l|l|l|}
\hline \mathrm{Dr} & \text { Bank trust } & 8000000 & \
\hline \mathrm{Cr} & \text { Application } & & 8000000 \
\hline & & & \
\hline 1 \text { August: } & & \
\hline \mathrm{Dr} & \text { Application } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline\
\hline \mathrm{Dr} & \text { Allotment } & 12000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 12000000 \
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 10000000 \
\hline \
\text { Entry for } 1 \text { October: } & & \
\hline \mathrm{Dr} & \text { Call } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline & & & \
\hline \text { Summary entry for October: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 8000000 & \
\hline \mathrm{Cr} & \text { Call } & & 8000000 \
\hline 
\end{array}
\end{array}$ 
C)  \(\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|c|l|l|l|}
\hline \mathrm{Dr} & \text { Bank trust } & 10000000 & \
\hline \mathrm{Cr} & \text { Application } & & 10000000 \
\hline{\text {1 August: }} & & \
\hline \mathrm{Dr} & \text { Application } & & \
\hline \mathrm{Cr} & \text { Share capital } & 8000000 & \
\hline & & & 8000000 \
\hline \mathrm{Dr} & \text { Allotment } & 12000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 12000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Application } & 2000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 2000000 \
\hline\
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Bank trust } & & 10000000 \
\hline & & & \
\hline \text { Summary entry for August: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 10000000 \
\hline \
\hline \text { Entry for } 1 \text { October: }&&\
\hline \mathrm{Dr} & \text { Call } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline\
\hline\text { Summary entry for October: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 8000000 & \
\hline \mathrm{Cr} & \text { Call } & & 8000000 \
\hline
\end{array}
\end{array}\) 
D)  $\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|l|l|l|l|}
\hline \mathrm{Dr} & \text { Application } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline\
 \hline \text { August: } \
\hline \mathrm{Dr} & \text { Allotment } & 12000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 12000000 \
\hline\
\hline \text { Dr } & \text { Application } & 2000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 2000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Bank trust } & & 10000000\
\hline\
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 10000000 \
\hline & & & \
\hline \text { Entry for } 1 \text { October: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 8000000 & \
\hline \mathrm{Cr} & \text { Call } & & 8000000 \
\hline
\end{array}
\end{array}$ 
A)  $\begin{array}{|c|l|l|l|}
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 10000000 \
\hline & & &\
\hline{\text {1 August: }} & & \
\hline \mathrm{Dr} & \text { Application } & 8000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 8000000 \
\hline & & &\
\hline \mathrm{Dr} & \text { Allotment } &  12000000& \
\hline \mathrm{Cr} & \text { Share capital } &  & 12000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Application } &2000000 & \
\hline \mathrm{Cr} & \text { Allotment } &  &2000000 \
\hline\
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Application } & & 10000000 \
\hline & & & \
\hline \text { Entry for } 1 \text { October: } & & \
\hline \mathrm{Dr} & \text { Call } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline
\end{array}$ 
B)  $\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|c|l|l|l|}
\hline \mathrm{Dr} & \text { Bank trust } & 8000000 & \
\hline \mathrm{Cr} & \text { Application } & & 8000000 \
\hline & & & \
\hline 1 \text { August: } & & \
\hline \mathrm{Dr} & \text { Application } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline\
\hline \mathrm{Dr} & \text { Allotment } & 12000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 12000000 \
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 10000000 \
\hline \
\text { Entry for } 1 \text { October: } & & \
\hline \mathrm{Dr} & \text { Call } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline & & & \
\hline \text { Summary entry for October: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 8000000 & \
\hline \mathrm{Cr} & \text { Call } & & 8000000 \
\hline 
\end{array}
\end{array}$ 
C)  \(\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|c|l|l|l|}
\hline \mathrm{Dr} & \text { Bank trust } & 10000000 & \
\hline \mathrm{Cr} & \text { Application } & & 10000000 \
\hline{\text {1 August: }} & & \
\hline \mathrm{Dr} & \text { Application } & & \
\hline \mathrm{Cr} & \text { Share capital } & 8000000 & \
\hline & & & 8000000 \
\hline \mathrm{Dr} & \text { Allotment } & 12000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 12000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Application } & 2000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 2000000 \
\hline\
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Bank trust } & & 10000000 \
\hline & & & \
\hline \text { Summary entry for August: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 10000000 \
\hline \
\hline \text { Entry for } 1 \text { October: }&&\
\hline \mathrm{Dr} & \text { Call } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline\
\hline\text { Summary entry for October: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 8000000 & \
\hline \mathrm{Cr} & \text { Call } & & 8000000 \
\hline
\end{array}
\end{array}\) 
D)  $\begin{array}{l}
\text { Summary entry for July: }\
\begin{array}{|l|l|l|l|}
\hline \mathrm{Dr} & \text { Application } & 8000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 8000000 \
\hline\
 \hline \text { August: } \
\hline \mathrm{Dr} & \text { Allotment } & 12000000 & \
\hline \mathrm{Cr} & \text { Share capital } & & 12000000 \
\hline\
\hline \text { Dr } & \text { Application } & 2000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 2000000 \
\hline & & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Bank trust } & & 10000000\
\hline\
\hline {\text { Summary entry for August: }} & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 10000000 & \
\hline \mathrm{Cr} & \text { Allotment } & & 10000000 \
\hline & & & \
\hline \text { Entry for } 1 \text { October: } & & \
\hline \mathrm{Dr} & \text { Cash at bank } & 8000000 & \
\hline \mathrm{Cr} & \text { Call } & & 8000000 \
\hline
\end{array}
\end{array}$

Question 13

The forfeited shares account is used to make up any shortfall:

Accepted Answer

A) to the forfeiting shareholder. 
B) the forfeited share reserve. 
C) on the issue of the shares. 
D) on the cash at bank account . 
A) to the forfeiting shareholder. 
B) the forfeited share reserve. 
C) on the issue of the shares. 
D) on the cash at bank account .

Question 14

When a company sells shares,various costs are incurred.Discuss why these costs are classified as equity and the circumstance that would allow these costs to be expensed.

Accepted Answer

Costs can include legal,promotional,acco

Question 15

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

Accepted Answer

A) The accounts are similar in nature to an account receivable and are to be disclosed in the statement of financial position as a current asset. 
B) The accounts are similar to a future income benefit and are to be separately disclosed as assets in the statement of financial position. 
C) The accounts are similar to an account receivable and are disclosed in the statement of financial position as a reduction against share capital. 
D) The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the statement of financial position. 
A) The accounts are similar in nature to an account receivable and are to be disclosed in the statement of financial position as a current asset. 
B) The accounts are similar to a future income benefit and are to be separately disclosed as assets in the statement of financial position. 
C) The accounts are similar to an account receivable and are disclosed in the statement of financial position as a reduction against share capital. 
D) The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the statement of financial position.

Question 16

Double entry accounting requires that:

Accepted Answer

A) the claims held by external parties equal the claims held by the owners. 
B) the total assets of an entity equal the total of the claims held by external parties plus those claims held by the owners. 
C) the liabilities of the entity equal its total assets plus the claims held by the owners. 
D) the recognition of the claims held by owners will match the entity's total assets. 
A) the claims held by external parties equal the claims held by the owners. 
B) the total assets of an entity equal the total of the claims held by external parties plus those claims held by the owners. 
C) the liabilities of the entity equal its total assets plus the claims held by the owners. 
D) the recognition of the claims held by owners will match the entity's total assets.

Question 17

Where new investors are offered the opportunity to buy new shares this will have the effect of diluting the existing shareholders' interest in the company.

Accepted Answer

A) True 
 B)False

Question 18

What is meant by an oversubscription of a share offer?
 Explain the two approaches that could be adopted in the case of an oversubscription.

Accepted Answer

When there is an oversubscription for sh

Question 19

If an entity performs a share split on a partly paid share,the split must be done in such a way as to divide the uncalled portion equally among the shares issued.

Accepted Answer

A) True 
 B)False

Question 20

Where there is a redemption of preference shares 'out of profit':

Accepted Answer

A) The redemption is recorded in the appropriations section of the statement of comprehensive income. 
B) The redemption is recorded as an expense. 
C) The redemption is recorded as a liability and is amortised over a maximum of five years. 
D) The redemption is not recorded in the current period. 
A) The redemption is recorded in the appropriations section of the statement of comprehensive income. 
B) The redemption is recorded as an expense. 
C) The redemption is recorded as a liability and is amortised over a maximum of five years. 
D) The redemption is not recorded in the current period.

The statement of changes in equity:

Which of the following share issue costs does not qualify as a deduction from share capital?

IAS 1 Presentation of Financial Statements requires an entity to disclose a description of the nature and purpose of each reserve within equity.

In a public issue of shares,the procedure to be adopted in the case of an oversubscription is normally specified in the prospectus.

The owners' equity of an organisation is the same as the shareholders' funds of a company.

Explain the differences between a rights issue and share options.

When a company redeems preference shares:

The forfeited shares account is used to make up any shortfall:

When a company sells shares,various costs are incurred.Discuss why these costs are classified as equity and the circumstance that would allow these costs to be expensed.

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

Double entry accounting requires that:

Where new investors are offered the opportunity to buy new shares this will have the effect of diluting the existing shareholders' interest in the company.

What is meant by an oversubscription of a share offer? Explain the two approaches that could be adopted in the case of an oversubscription.

If an entity performs a share split on a partly paid share,the split must be done in such a way as to divide the uncalled portion equally among the shares issued.

Where there is a redemption of preference shares 'out of profit':

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters

Exam 11: Share Capital, Reserves and Share Options Employee Bonus Schemes

The statement of changes in equity:

Which of the following share issue costs does not qualify as a deduction from share capital?

IAS 1 Presentation of Financial Statements requires an entity to disclose a description of the nature and purpose of each reserve within equity.

In a public issue of shares,the procedure to be adopted in the case of an oversubscription is normally specified in the prospectus.

The owners' equity of an organisation is the same as the shareholders' funds of a company.

Explain the differences between a rights issue and share options.

When a company redeems preference shares:

The forfeited shares account is used to make up any shortfall:

When a company sells shares,various costs are incurred.Discuss why these costs are classified as equity and the circumstance that would allow these costs to be expensed.

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

Double entry accounting requires that:

Where new investors are offered the opportunity to buy new shares this will have the effect of diluting the existing shareholders' interest in the company.

What is meant by an oversubscription of a share offer? Explain the two approaches that could be adopted in the case of an oversubscription.

If an entity performs a share split on a partly paid share,the split must be done in such a way as to divide the uncalled portion equally among the shares issued.

Where there is a redemption of preference shares 'out of profit':

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Income Taxes

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

Filters