Exam 2: Financing Company Operations

A company's share capital consists of 100 000 ordinary shares issued at $4 and paid to $2 per share.On 1 February,a first call of $1 was made on the ordinary shares.By 28 February,call money was received on 90 000 shares.On 31 March,the shares on which calls were outstanding were forfeited.The company's constitution provided for any surplus on resale to be returned to the shareholders whose shares were forfeited.On 15 April,the forfeited shares were reissued as paid to $4.00 for a payment of $3.50 per share.The entry to record the reissue of the forfeited shares is:

A company forfeited 10 000 shares that had been paid to $2 but on which a $1 call was outstanding.The company's constitution provided for any surplus on reissue to be returned to the forfeiting shareholders.The forfeited shares were reissued as paid to $4.00 for a payment of $3.50 per share.Costs of reissue amounted to $2000.The amount of the surplus repaid to the shareholders whose shares were forfeited is:

A share option is an instrument that gives the holder the right but not the obligation to:

Debentures may be issued at a nominal value,a premium or a discount.

If a company forfeits shares and the company's constitution is silent in relation to reissue of the shares,the company is entitled to keep any balance in the account after reissue,payment of unpaid calls and interest and administrative costs.

Smith Ltd was registered as a company on 1 July 2013.On 4 July 2013,Smith Ltd issued a prospectus offering 300 000 ordinary shares at an issue price of $4.00 each,payable $2.00 on application and $2.00 on allotment.Applications closed on 1 August 2013 with the company having received applications for 330 000 shares.The shares were allotted on 15 August 2013,with the over-subscription amount being refunded to unsuccessful applicants.All allotment money was received by 31 August 2013.Following the allotment,the amount transferred from the cash trust account to the cash account would be:

A bonus issue of shares to existing shareholders has which of the following impacts on the equity of a company?

Share issue costs such as professional adviser's fees and brokerage fees must be reported as an expense in the income statement.

After the completion of all steps in the issue of shares,the company's statement of financial position will show which of the following changes?

Only fully paid-up preference shares can be redeemed by a company.

The journal entry to record further receipts of cash due on the allotment of shares will include which of the following line items?

In respect to the issue of shares by companies,which of the following statements is incorrect?

Share splits and share consolidations are only allowed if a company's constitution contains specific provisions relating to such transactions.

Where share options are issued and subsequently lapse,the cost of the lapsed options is transferred to a Lapsed Options Reserve account.

If the balance in a forfeited shares account is refundable to the owners of those shares,then the account is classified as a component of:

In accordance with AASB 138 Intangible Assets,company formation costs such as professional legal and accounting advice qualifies for recognition as an asset.

The costs of issuing shares effectively:

According to the Corporations Act,when a company issues shares to the public,the issue price,terms and rights of the shares are determined by:

On 1 July 2013,a company redeemed its $200 000 debenture liability using its available cash on hand.The terms of the debenture issue provided that a premium of 5% was to be paid on redemption of the debentures.Which of the following is the entry to record the redemption?

A rights issue gives all existing shareholders the right to an additional number of shares in proportion to their current shareholding.