A$-10\mathrm{.}2$ Hatkigh Ltd$.$ is a medium$-$sized engineering firm based in Regina. The most recent financial state$-$ A$-10\mathrm{.}2$ Hatleigh Ltd$.$ is a medium$-$sized engineering firm based in Regina. The most recent financial state$-$

ments of the business are shown below:

Current liabilities

Bank overdraft $4,776$

Accounts payable $3,322$

Total current liabilities $8,299$

Long$-$term liabilities

$10\%$ debentures $2010-11($secured on the land and buildings$)3,{500}_{?}$

Total liabilities

$11,799$

Shareholders' equity

Common shares $(32,000,000$ shares outstanding$)$

$8,000$

Retained earnings

$5,{034}_{?}$

Total shareholders' equity Hatleigh Ltd$.$

Income Statement and Addition to Retained Earnings

for the year ended April $30,2010$

The business made a one$-$for$-$four rights issue of common shares during the year. Sales for the

forthcoming year are forecast to be the same as for the year to April $30,2010.$ The gross profit margin is

likely to stay the same as in previous years but expenses $($excluding interest payments$)$ are likely to fall by

$10\%$ as a result of economies.

The bank has been concerned that the business has persistently exceeded the agreed overdraft

limits and, as a result, the business has now been asked to reduce its overdraft to $$3$ million over the

next three months. The business has agreed to do this and has calculated that interest on the bank

overdraft for the forthcoming year will be $$440,000($after taking account of the required reduction in

the overdraft$).$ In order to achieve the reduction in overdraft, the chairman of Hatleigh Ltd$.$ is consid$-$

ering either the issue of more common shares for cash to existing shareholders at a discount of $20\%,$

or the issue of more $10\%$ debentures redeemable $2013-2014$ at the end of July $2010.$ It is believed that

the share price will be $$1\mathrm{.}50$ and the $10\%$ debentures will be quoted at $$82$ per $$100$ nominal value at

the en

ments of the business are shown below:

Hateigh Ltd$.$

lalante Sleat

$2$s at April $30,2010($in $ thousands$)$

Current assets

Accounts receivable

Inventory

Raw materials $824$

Work in prosess $,2,120$

Total imentary

$8,{380}_{?}$

Total current assets

$16,958$

Praperty, plant, and equipment

Land $1,500$

Buildings $($net$),2,385$

Plant and machinery $(net)2,520$

Praperty, plant, and equipment $($net$)$

$7\mathrm{.}875$

Tatal assets

Current liatilities

Bank averdaft $4,776$

Accounts parable $3,322$

lncone tanes payable $201$

Total curnent liabilities

$8,299$

Ltag$-$term liatilities

$10\%$ detentures $2010-11($seaured an the land and buildings$)3,500$

Tatal liabilities

$11,799$

Sharehalders' equity

Common shares $(32,000,000$ shares cutstanding$)8,000$

Relaired earnings $,5,034$

Total shareholders' equity

$13,{034}_{?}$

Tatal liabilities plus shareholders' equity

$24\mathrm{.}833$

Hafteigh Ltd$.$

Intome Statentint and Adtition to Retained Earnitgs

for the year ended April $3$L$,2010$

The business made a one$-$for$-$four rights issue of common shares during the year. Sales for the

forthcoming year are forecast to be the same as for the year to April $30,2010.$ The gross profit margin is

likely to stay the same as in previous years but expenses $($excluding interest payments$)$ are likely to fill by

$10\%$ as a result of economies.

The bank has been concerned that the business has persistently exceeded the agreed overdraft

limits and, as a result, the business has now been asked to reduce its overdraft to $$3$ million over the

next three months. The business has agreed to do this and has calculated that interest on the bank

overdraft for the forthcoming year will be $$440,000($after taking account of the required reduction in

the overdraft$).$ In order to achieve the reduction in overdraft, the chairman of Hatleigh Ltd$.$ is consid$-$

ering either the issue of more common shares for cash to existing shareholders at a discount of $20\%,$

or the issue of more $10\%$ debentures redeemable $2013-2014$ at the end of July $2010.$ It is believed that

the share price will be $$1\mathrm{.}50$ and the $10\%$ debentures will be quoted at $$82$ per $$100$ nominal value at

the end of July $2010.$ The bank overdraft is expected to remain at the amount shown in the balance

sheet until that date.