ACCIAIS- Homework Exercises week 11 Exercise 1 - Debt Financing versus Equity Financing Donkey Ltd's equity is as follows: Share capital Retained earnings and reserves l'Equity $5 000 000 2 000 000 $7 000 000 Donkey Ltd plans to expand its operations by establishing a branch in Thailand. The new branch will cost $3.5 million. Expected profit before tax and interest when the new branch is operational is $2.2 million. The tax rate is 30%. Donkey Ltd is considering two financing alternatives: 1. Borrow $3.5 million at 8% interest. 2 Issue 100 000 $35 shares. Required Which funding alternative yields the higher return on equity? What other factors should be considered? uzqn8k.cloudfront.net/9a/4e/9a4e0db735757c86dcb2dd84417fb8ef845955d1?response-ca + (0 Page view A Read aloud . V Draw Exercise 2 Journalise share transactions Sport's Field Ltd was registered on 31 January 2019. It invited the public to subscribe to the issue of 35 000 ordinary shares for $1 per share: $0.60 due on application, $0.30 due on allotment and the balance due on call. Jan. 10 Mar. 1 Mar. 2 Prospectus issued. Received applications for 35 000 shares. Allotted 35 000 ordinary shares. All allotment money received. Remaining capital called. All money due on call is received. Mar. 31 Nov. 1 Nov 30 Required a. Journalise the transactions, Post to the equity accounts (use T accounts). What is the share capital of Sport's Field Ltd at 1 December? Page 1 of 2 Exercise 3 - Prepare dividend entries On 1 January 2019, Rake Ltd had equity accounts as follows. $1 800 000 Share capital (60 000 shares issued for $30 each) General reserve Retained earnings 250 000 900 000 During the year, the following transactions occurred. Feb. 1 Mar. 1 July 1 Declared a $0.50 cash dividend per share to shareholders, payable on 1 March Paid the dividend declared in February Declared a 10% share dividend to shareholders, distributable on 31 July. On 1 July the market price of the shares was $40 per share and this was determined to be the amount at which the dividend shares would be issued. Issued the shares for the share dividend. Declared a cash dividend of $0.50 per share on 15 December, payable on 5 January 2020. July 31 Dec. 1 Required a b. Journalise the transactions. Enter the beginning balances and post the entries to the equity Taccounts. Prepare the equity section of Rake Ltd's statement of financial position as at 31 December c. ACCIAIS- Homework Exercises week 11 Exercise 1 - Debt Financing versus Equity Financing Donkey Ltd's equity is as follows: Share capital Retained earnings and reserves l'Equity $5 000 000 2 000 000 $7 000 000 Donkey Ltd plans to expand its operations by establishing a branch in Thailand. The new branch will cost $3.5 million. Expected profit before tax and interest when the new branch is operational is $2.2 million. The tax rate is 30%. Donkey Ltd is considering two financing alternatives: 1. Borrow $3.5 million at 8% interest. 2 Issue 100 000 $35 shares. Required Which funding alternative yields the higher return on equity? What other factors should be considered? uzqn8k.cloudfront.net/9a/4e/9a4e0db735757c86dcb2dd84417fb8ef845955d1?response-ca + (0 Page view A Read aloud . V Draw Exercise 2 Journalise share transactions Sport's Field Ltd was registered on 31 January 2019. It invited the public to subscribe to the issue of 35 000 ordinary shares for $1 per share: $0.60 due on application, $0.30 due on allotment and the balance due on call. Jan. 10 Mar. 1 Mar. 2 Prospectus issued. Received applications for 35 000 shares. Allotted 35 000 ordinary shares. All allotment money received. Remaining capital called. All money due on call is received. Mar. 31 Nov. 1 Nov 30 Required a. Journalise the transactions, Post to the equity accounts (use T accounts). What is the share capital of Sport's Field Ltd at 1 December? Page 1 of 2 Exercise 3 - Prepare dividend entries On 1 January 2019, Rake Ltd had equity accounts as follows. $1 800 000 Share capital (60 000 shares issued for $30 each) General reserve Retained earnings 250 000 900 000 During the year, the following transactions occurred. Feb. 1 Mar. 1 July 1 Declared a $0.50 cash dividend per share to shareholders, payable on 1 March Paid the dividend declared in February Declared a 10% share dividend to shareholders, distributable on 31 July. On 1 July the market price of the shares was $40 per share and this was determined to be the amount at which the dividend shares would be issued. Issued the shares for the share dividend. Declared a cash dividend of $0.50 per share on 15 December, payable on 5 January 2020. July 31 Dec. 1 Required a b. Journalise the transactions. Enter the beginning balances and post the entries to the equity Taccounts. Prepare the equity section of Rake Ltd's statement of financial position as at 31 December c