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Millennium Limited is in the process of expanding and require capital for the expansion the issue of preference shares. planned. The board therefore approved Preference shares On 1 July 2020, the company issued 1 000 000 redeemable preference shares of R15,00 each. These shares pay dividends that are not within the discretion. of Millennium Limited, at a market-related rate of 12% per annum. As per the terms and conditions , 50% of the shares will be redeemed at par value for cash on 31 December 2021. The remainder will be redeemed on 31 December 2023. Debentures Limited By 31 December 2021, the expansion project had been completed . Millennium had some of the capital left, which was raised through the issue of preference shares The directors therefore decided to invest these surplus funds in debentures. The terms of the debentures purchased on 1 January 2022 were as follow : ● 5 000 debentures with a face value of R500 each. The debentures are redeemable in 2 years time. . . An annual rate of 9% is applicable and interest is payable annually on 31 Decem ber. 1 The purchase price of the debentures amounts to their present value. Assume an effective interest rate of 9.66 %. Millennium Limited's business model is to hold the debentures to collect contractual cash flows and that the cash flows are solely payments of principal and interest on the principal amount. REQUIRED: 2.1) Discuss the correct classification and presentation of the preference shares in the financial statements of Millenium Limited for the financial year ended 31 December 2020 in accordance with IAS 32. (13 marks) 2.2) Prepare the journal entries to record the acquisition of the debentures in the records of Millenium Limited for the financial year ended 31 December 2022. Round all answers to the nearest Rand. Include statement references ("journal narrations"). Millennium Limited is in the process of expanding and require capital for the expansion the issue of preference shares. planned. The board therefore approved Preference shares On 1 July 2020, the company issued 1 000 000 redeemable preference shares of R15,00 each. These shares pay dividends that are not within the discretion. of Millennium Limited, at a market-related rate of 12% per annum. As per the terms and conditions , 50% of the shares will be redeemed at par value for cash on 31 December 2021. The remainder will be redeemed on 31 December 2023. Debentures Limited By 31 December 2021, the expansion project had been completed . Millennium had some of the capital left, which was raised through the issue of preference shares The directors therefore decided to invest these surplus funds in debentures. The terms of the debentures purchased on 1 January 2022 were as follow : ● 5 000 debentures with a face value of R500 each. The debentures are redeemable in 2 years time. . . An annual rate of 9% is applicable and interest is payable annually on 31 Decem ber. 1 The purchase price of the debentures amounts to their present value. Assume an effective interest rate of 9.66 %. Millennium Limited's business model is to hold the debentures to collect contractual cash flows and that the cash flows are solely payments of principal and interest on the principal amount. REQUIRED: 2.1) Discuss the correct classification and presentation of the preference shares in the financial statements of Millenium Limited for the financial year ended 31 December 2020 in accordance with IAS 32. (13 marks) 2.2) Prepare the journal entries to record the acquisition of the debentures in the records of Millenium Limited for the financial year ended 31 December 2022. Round all answers to the nearest Rand. Include statement references ("journal narrations").
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