The summary statement of financial position of Jade Ltd at its year end of 30 November...

 

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The summary statement of financial position of Jade Ltd at its year end of 30 November 2020 is as follows: Total assets Equity Share capital: 30,000 £2 ordinary shares Revenue reserves Non-current liabilities Bank loan (8%) £ 110,000 60,000 40,000 100,000 10,000 110,000 At this time Jade Ltd wishes to purchase a new machine costing £20,000 and is considering whether to fund this purchase via an additional bank loan (at an 8% annual interest rate) OR through issuing 8,000 shares at a market price of £2.50 per share. Jade Ltd will also pay a dividend of 10 pence per share to all ordinary shareholders at its year end. Assume Jade Ltd pays its dividend and purchases the machine on 30 November 2020. Redraft the summary statement of financial position (above) showing the changes after paying the dividend and purchasing the machine, if the £20,000 additional finance was raised through: (i) An 8% bank loan; or (ii) Issuing 8,000 £2 ordinary shares at an issue price of £2.50 per share; Note that you need to treat these as 2 separate options and hence redraft the statement twice - once to show option (i) above and then secondly to show option (ii) above - including the dividend payment within both. The summary statement of financial position of Jade Ltd at its year end of 30 November 2020 is as follows: Total assets Equity Share capital: 30,000 £2 ordinary shares Revenue reserves Non-current liabilities Bank loan (8%) £ 110,000 60,000 40,000 100,000 10,000 110,000 At this time Jade Ltd wishes to purchase a new machine costing £20,000 and is considering whether to fund this purchase via an additional bank loan (at an 8% annual interest rate) OR through issuing 8,000 shares at a market price of £2.50 per share. Jade Ltd will also pay a dividend of 10 pence per share to all ordinary shareholders at its year end. Assume Jade Ltd pays its dividend and purchases the machine on 30 November 2020. Redraft the summary statement of financial position (above) showing the changes after paying the dividend and purchasing the machine, if the £20,000 additional finance was raised through: (i) An 8% bank loan; or (ii) Issuing 8,000 £2 ordinary shares at an issue price of £2.50 per share; Note that you need to treat these as 2 separate options and hence redraft the statement twice - once to show option (i) above and then secondly to show option (ii) above - including the dividend payment within both.

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i An 8 bank loan Total assets 110000 Equity Share capital 30000 2 ordinary s... View the full answer