Data Sales Limited (Data Sales) was incorporated in January 2009. It has 180,000 shares on issue...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Data Sales Limited (Data Sales) was incorporated in January 2009. It has 180,000 shares on issue which are owned by 20 unrelated shareholders who each own 9,000 ordinary shares in the company. The balance sheet of the company as at 31 March 2018 is as follows: Issued Capital Realised Capital Profits Retained Earnings May 2010 September 2011 June 2012 220,000 780,000 600,000 $1.600.000 February 2015 Cash $1.600.000 Data Sales issued 120,000 ordinary shares at $1 each when it was incorporated in 2009. Since then, it has undergone the following changes to its issued share capital: Investments $200,000 $1,400,000 The company issued a further 80,000 ordinary shares at $1.50 each. 40,000 ordinary shares were cancelled in consideration for a payment of $1.20 per share in an off-market repurchase. The amount paid for these shares was exempt from tax in the vending shareholders' hands. Data Sales declared a cash dividend of $1.00 per share. Some shareholders elected to take bonus shares instead of the cash dividend, resulting in 8,000 ordinary shares in lieu of cash dividends of $10,000. Non-taxable bonus issue of 12,000 shares from the capitalisation of realised capital gains of $18,000. The realised capital profits reported in the above balance sheet arose from sale of shares in a subsidiary company to a foreign company. The sale proceeds were invested in a portfolio of shares in companies listed on the New Zealand Stock Exchange. Required: (a) On 15 March 2018, Data Sales made an offer directly to 5 of the shareholders to repurchase 6,500 shares from each of them for $9.00 per share. By 31 March 2018, 4 of the 5 shareholders had accepted the offer. Determine whether the amounts received by these shareholders will be taxable to them as a dividend. (b) Now assume that, instead of making the share repurchase offer to only 5 shareholders, Data Sales offered to purchase 1,000 of every shareholder's shares at $1.25 each, and acceptances were received from 14 of the 20 shareholders. The market value of the shares on 15 March 2018 was $1.15 per share. Determine whether the amounts received by these shareholders will be taxable to them as a dividend. (c) Instead of undertaking the share repurchases and cancelations in (a) and (b) above, assume that on 31 March 2018 the company decides to liquidate and distribute the proceeds on liquidation to the shareholders. The investment portfolio was sold on the stock exchange to unrelated parties for $1,800,000 before the company was liquidated. (You can assume that the shares were held on capital account.) Determine how much the 20 shareholders will receive for each of their shares upon liquidation and how much of this amount will be taxable to them as a dividend. Data Sales Limited (Data Sales) was incorporated in January 2009. It has 180,000 shares on issue which are owned by 20 unrelated shareholders who each own 9,000 ordinary shares in the company. The balance sheet of the company as at 31 March 2018 is as follows: Issued Capital Realised Capital Profits Retained Earnings May 2010 September 2011 June 2012 220,000 780,000 600,000 $1.600.000 February 2015 Cash $1.600.000 Data Sales issued 120,000 ordinary shares at $1 each when it was incorporated in 2009. Since then, it has undergone the following changes to its issued share capital: Investments $200,000 $1,400,000 The company issued a further 80,000 ordinary shares at $1.50 each. 40,000 ordinary shares were cancelled in consideration for a payment of $1.20 per share in an off-market repurchase. The amount paid for these shares was exempt from tax in the vending shareholders' hands. Data Sales declared a cash dividend of $1.00 per share. Some shareholders elected to take bonus shares instead of the cash dividend, resulting in 8,000 ordinary shares in lieu of cash dividends of $10,000. Non-taxable bonus issue of 12,000 shares from the capitalisation of realised capital gains of $18,000. The realised capital profits reported in the above balance sheet arose from sale of shares in a subsidiary company to a foreign company. The sale proceeds were invested in a portfolio of shares in companies listed on the New Zealand Stock Exchange. Required: (a) On 15 March 2018, Data Sales made an offer directly to 5 of the shareholders to repurchase 6,500 shares from each of them for $9.00 per share. By 31 March 2018, 4 of the 5 shareholders had accepted the offer. Determine whether the amounts received by these shareholders will be taxable to them as a dividend. (b) Now assume that, instead of making the share repurchase offer to only 5 shareholders, Data Sales offered to purchase 1,000 of every shareholder's shares at $1.25 each, and acceptances were received from 14 of the 20 shareholders. The market value of the shares on 15 March 2018 was $1.15 per share. Determine whether the amounts received by these shareholders will be taxable to them as a dividend. (c) Instead of undertaking the share repurchases and cancelations in (a) and (b) above, assume that on 31 March 2018 the company decides to liquidate and distribute the proceeds on liquidation to the shareholders. The investment portfolio was sold on the stock exchange to unrelated parties for $1,800,000 before the company was liquidated. (You can assume that the shares were held on capital account.) Determine how much the 20 shareholders will receive for each of their shares upon liquidation and how much of this amount will be taxable to them as a dividend.
Expert Answer:
Answer rating: 100% (QA)
According to the information given the amounts received by the shareholders who accepted the offer t... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
Students also viewed these accounting questions
-
The following are the summarised statements of financial position of North Ltd and South Ltd as at 31 December 2020 : Statements of Financial Position as at 31 December 2020 North South Ltd Ltd...
-
Prepare the consolidated balance sheet of House Group as at 31 December 2002 with workings of Goodwill, Group retained earnings, Minority interest and Investment in associates. Given below are the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The read-write head for a hand-held music player has a surface area of 0.04 mm. The head is held 0.04 m above the disk, which is rotating at a constant rate of 1800 rpm. Determine the torque T that...
-
1. Compare the business models and areas of strength of Apple, Google, and Microsoft. 2. Why is mobile computing so important to these three firms? Evaluate the mobile platform offerings of each...
-
Wisconsin Trading Company uses a periodic inventory system and has a beginning inventory as of April 1 of 150 tents. This consists of 150 tents purchased in February at a cost of \(\$ 210\) each....
-
Why is it important that a company provide its employees with a secure and respectful workplace?
-
Kathy Kennedy (age 44) is a single taxpayer and she lives at 212 North Pine Way, Payson, AZ 85541. Her Social Security number is 467-98-9784. Kathys earnings and income tax withholding as the...
-
7 5 points 8 Proctor & Gamble reports total dollar amount of assets as $119,307. This means the actual total dollar amount of assets at the end of the year is: $119,307,000,000 $119,307,000 $119,307...
-
In this mini-case, you will complete the test of details on accounts receivable for the 2019 audit of EarthWear Clothiers, Inc. The principal test of detail involves sending "confirmations" or...
-
For example, some positives of earned value is that it removes the ambiguity associated with project budget reporting. Further, earned value indexes provide a simple metric for monitoring progress...
-
How does symbolism influence audience decision-making? How aware is the audience of this influence? Identify a campaign that has used symbolism to influence audience decision making. Other than...
-
Below are three different scenarios. For each scenario, propose at least two possible solutions and explain how you arrived at these solutions. Choose the best solution and justify your decision...
-
Design a solution which will resolve a specific ethical conflict between a manager and an employee at Walmart. This needs to be a real situation not an imagined one. This must focus on an ethical...
-
I am the president on Oasis Ltd. a large and diversified corporation with interests in technology, agriculture, media, publishing, and natural resources. The company has had an extremely good year...
-
After the economy slowed, your boss called a meeting to speak with your team: "We need to double our usual efforts to retain customer loyalty. In order to do that, we need to know what our customers...
-
a. Write a synchronization solution to the below scenario using semaphores only: (3 marks) Process P2 Process P4 Process P3 77 Shared variables Put your semaphores declaration & initialization here...
-
Briefly discuss the implications of the financial statement presentation project for the reporting of stockholders equity.
-
Pony Express Company has $750,000 in assets and $300,000 of debt. The income for the year is $55,000. a. Calculate the ROA. b. Determine the return on shareholders' equity. c. If the asset turnover...
-
If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, in which ratios would each group be most interested, and for what reasons?
-
As she headed toward her boss's office, Emily Hamilton, chief operating officer for the Aerocomp Corporation-a computer services firm that specialized in airborne support-wished she could remember...
-
What would the QA/QC planning grid (see Figure 12. 6) look like for a project you have been involved in? Data from Figure 12. 6 Table 12.6 QA/QC planning grid, with examples Quality assurance...
-
Why is the definition of quality critical to the success and acceptance of a project?
-
What is the purpose of the Quality Management Plan?
Study smarter with the SolutionInn App