Exam 2: Financing Company Operations

According to ASX Listing Rule 7.1,the proportion of existing capital that a listed company can issue in any one year without the prior approval of the ordinary shareholders is:

When shares are issued fully payable on application,the journal entries to record the issue (assuming the minimum subscription is reached)are

It is possible for a company to issue different types of preference shares provided that the rights of each type are specified in its constitution.

Underwriting commission fees are treated as expenses as they are not considered to be an integral part of the equity issue transaction.

If a company has not reached a minimum subscription level within 90 days of the date of the disclosure document,the money paid in by applicants must be refunded by the company within 1 month in accordance with the requirements of ss 724(1)and (2)of the Corporations Act.

Interest paid to shareholders on calls in advance is:

A company's share capital consists of 50 000 ordinary shares issued at $2 and paid to $1 per share.On 1 September,a first call of 50c was made on the ordinary shares.By 30 September,call money was received on 45 000 shares.On 31 October,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.The entry to record the forfeiture of shares is:

If the minimum number of applications specified in the disclosure document is not received,all application money must be refunded to applicants.The minimum number of applications must be received within:

Many investors may wish to purchase debentures or notes offering the ability to be converted into fully paid shares at the maturity date,in lieu of a cash payment.

When a company requests a further payment from shareholders of the unpaid amounts on their shares,it:

If a company uses its surplus cash reserves to buy-back its own shares,the total equity of the company will increase by the equivalent amount of cash spent.

If a company makes a renounceable rights issue,the shareholders are not allowed to sell their rights,but must either accept or reject the offer to purchase additional shares in the company.

If a company's constitution does not contain rules governing the forfeiture of shares,then the company:

Which of the following is the appropriate journal entry to record the cash collected from applicants for shares before the shares are actually issued?

Redeemable preference shares are always considered to be compound financial instruments that contain both equity and liability components.

Before a company issues shares to the public,the company must:

Underwriting and other share issue costs paid to a stockbroker or financial institution should be reported in the statement of financial position as a/an:

The appropriate account to record any excess application money received and retained by a company to reduce allotment money due and in payment of future calls,is the:

Any unpaid calls are accounted for as a receivable in a company's financial statements.

Prior to the allotment/issue of shares,the balance in the application account represents a liability of the company to the applicants.