What are the most common reasons for a corporation to reduce its share capital

Questions:

1.(Note this question is from the Week 2Tutorial) ABC Ltd was registered on 30 June 2019. The next daythe directors issued a prospectus inviting applicants for 400,000 ordinary shares with an issue price of $2. The shares were payable in full on application. By 31July2019, the company had received 500,000 applications, together with the application monies. The directors allotted 400,000 shares on 1 August2019and returned the money for additional applications. Required: (a)Prepare general journal entries to record the above data. (b)Recordthe above data usingledgers.

2.(Note this question is from the Week 4Tutorial)

(a)What are the most common reasons for a corporation to reduce its share capital?) (b)What are the allowable methods of reducing share capital?

(c)Discuss the differences between a share buyback and a capital reduction.

(d)What are the different types of debtinstruments discussed in this unit?

3.(Note this question isfrom the Week 6Tutorial) (a)Explain the ways in which a company may expand by obtaining new assets. (b)Jamuna River Ltd purchased a parcel of assets and liabilitiescomprisinga business directly from Lyneham Pty Ltd. The parcelof assets, measured at net fair value, consisted of: Balance of Accounts: ($)___Plant 150,000 Land 240,000 Vehicles 120,000 Accounts receivable 30,000 Account payabl(48,000)Total492,000 Required: Prepare journal entries to record the acquisition by Jamuna River Ltd, assuming that: (i)The cost of acquisition was $600,000 cash. (ii)The cost of acquisition was $432,000 cash.

4.(Note this question is from the Week 9Tutorial)On 1 July 2018, Sunflower Ltd acquired 90% of the share capital to gain control of Palm Ltd. The following intra-group transactions occurred during the year ending 30 June 2019.

1. During the 2018/2019 period, Sunflower Ltd sold inventory to Palm Ltd for $1,600,000. Sunflower Ltd purchased this inventory at $1,000,000. By 30 June 2019, Palm Ltd hadsold 70% of that inventory toathird party.

2.Palm Ltd declared a final dividend of $1,300, 000 from current year’s profits.

3.Palm Ltd paid Sunflower Ltda fee for administrative services they provided of $40,000.

4.Palm Ltd has an intra-group loan with Sunflower Ltd. Sunflower Ltd provided a loan of $10,000,000. The loan charges 4% interest annually. One half of the interest for the current year remains unpaidasat 30 June 2019.

5. Palm Ltd sold land to Sunflower Ltd for $560,000. The land was purchased by Palm Ltd at $300,000. Required: a. Prepare the journal entries required to eliminate the intra-group transactions above. b.When are profits realised in relation to inventory transfers within the group? c.What are the rules for the elimination entry for intra-group transactions relating todividendsdeclared by the parent company and dividendsdeclared by the subsidiary company? (1 mark) 5.(Note this question is from the Week 10Tutorial) On 1st July, 2018 Nile Ltdacquired 70% of the share capital of Amazon Ltd for $80,000,000.The equity of Amazon Ltdasat the acquisition date was: Share Capital$ 52,000,000General Reserve$ 20,000,000Retained Earnings$ 10,000,000All assets of Amazon Ltd were recorded at fair value on acquisition, except for one property which had a fair value which was $2,000,000 lower than its’carrying amount. The cost of the property was $20,000,000 with accumulated depreciation of $12,000,000. Ignore Taxes.

Required:

(a)Complete the worksheet below using the NET method. (b)Prepare the consolidation adjustments and eliminations entries and recognise the NCI in the pre-acquisition equity of Amazon Ltd, assuming that the NCI was measured at the proportionate share of the acquiree’s identifiable net assets. Elimination of Investment in Amazon LtdAmazon Ltd(S) $,000Nile Ltd(70% of Amazon)(P) $,00030% NCI$,000Fair Value of consideration transferredLess: FV of identifiable assets acquired & liabilities assumedShare capital on acquisition date52,000General reserve-acquisition date20,000Retained earnings-acquisition date10,000Fair value adjustmentGoodwill on acquisitionNon-controlling interest

6.(Note this question is from the Week 12Tutorial)The following information relates to Moon Light Ltd.

(a)At the beginning of the accounting period the company has a salarypayable liability of $200 and at the reporting date a salarypayable of $360. During the year the salaryexpense shown in the income statement was $400.

(b)At the beginning of the accounting period the company has property,plant and equipment (PPE) with a carrying amount of $400. At the end of the accounting period, the carrying amount of the PPE is $1,200. During the year depreciation charged was $80, a revaluation surplus of $240 was recordedand PPE with a carrying amount of $60 was sold for $80.

(c)At the beginning of the accounting period the company has retained earnings of $2,000 and at the end of the accounting period the balance of the retained earnings is $2,800. The reported profit for the year was $1,800.

(d)Moon Light Ltd also provides you with the following information on its salesand collection of accounts receivable:Sales for the year$16,000Discounts provided to customers for early payment $400Doubtful debts expense for the year$200Opening balance of accounts receivable$3,600Closing balance of accounts receivable$3,200Opening balance of the allowance for doubtful debts$360Closing balance of the allowance for doubtful debts$320

Required:

(a)Calculate the cash paid for salary

(b)Calculate the cash paid to purchase new PPE.

(c)Calculate the dividend paid.

(d)Calculate the cash collected from customers.

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