On 1 December 2022, you have been hired as the new group accountant of Bear Property Sdn
Question:
On 1 December 2022, you have been hired as the new group accountant of Bear Property Sdn Bhd (BPSB). BPSB is a property development company. BPSB owns the following investments in other companies:
Name of company | Nature of business | Equity Shares | Non-equity shares held |
A Sdn Bhd (ASB) | Hotel | 85% | Nil |
B Sdn Bhd (BSB) | Manufacturing | 35% | 70% |
C Sdn Bhd (CSB) | Transportation | 49% | 15% |
It is the company’s policy that majority voting rights will provide investor with the current ability to direct the relevant activities, which often will be through determining operating and financing policies.
BPSB also has appointed six of the seven directors of C Sdn Bhd.
During the year 2023, BPSB intended to acquire 80% equity interest in Memo Berhad, paying RM500,000 in cash.
To fund the acquisition, the directors are aware of different methods to raise capital.
The first board meeting for Year 2023 is expected to be held in January 2023. There are two new directors attending the meeting. You will need to prepare the following matters for your presentation in the meeting.
Question 1
a) Two main methods to raise capital are new shares issuance and borrowings. As the group accountant, you are required to explain the different methods to raise capital. Your
answer should include the advantages and disadvantages of the methods. [6 Marks]
b) Elaborate THREE (3) main steps involved in issuance of shares.[9 marks]
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas