Sweet Owl Bhd (SOB) was established on 1 January 2000. Record on 31 December 2021 shows...

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Sweet Owl Bhd (SOB) was established on 1 January 2000. Record on 31 December 2021 shows the followings: + RM 1,195,250 488,670 300,000 The following transactions took place during the year 2022: 1. Issued 150,000 units ordinary shares at RM2.70 per share on 1 March 2022, payable in full on application. The company received 450,000 applications in total. The balloting process was carried out and completed on 3 April 2022. The cash received from unsuccessful applicants were returned on the same day. The legal fees related to this were RM8,700. On 30 April 2022, the company sent a notification to its shareholders that a dividend of RM0.15 per share will be paid on 10 May 2022, stipulates that all shareholders that are registered before 1 January 2022 will be eligible for the dividend payment. 2. Items Ordinary share capital - 400,000 shares outstanding Retained earnings Revaluation reserve The board of directors of SOB were informed that the company has excessive cash in hand. They were also learnt that share buyback is another way of company distributing cash to its shareholders, other than cash dividends. REQUIRED: (b) (c) Prepare journal entries to record the issuance of shares and dividend payments in the financial year 2022. Explain share buybac and cash dividends to help the BOD of SOB to choose between the two instruments. Briefly discuss THREE (3) disadvantages of issuing preference shares to the company. Sweet Owl Bhd (SOB) was established on 1 January 2000. Record on 31 December 2021 shows the followings: + RM 1,195,250 488,670 300,000 The following transactions took place during the year 2022: 1. Issued 150,000 units ordinary shares at RM2.70 per share on 1 March 2022, payable in full on application. The company received 450,000 applications in total. The balloting process was carried out and completed on 3 April 2022. The cash received from unsuccessful applicants were returned on the same day. The legal fees related to this were RM8,700. On 30 April 2022, the company sent a notification to its shareholders that a dividend of RM0.15 per share will be paid on 10 May 2022, stipulates that all shareholders that are registered before 1 January 2022 will be eligible for the dividend payment. 2. Items Ordinary share capital - 400,000 shares outstanding Retained earnings Revaluation reserve The board of directors of SOB were informed that the company has excessive cash in hand. They were also learnt that share buyback is another way of company distributing cash to its shareholders, other than cash dividends. REQUIRED: (b) (c) Prepare journal entries to record the issuance of shares and dividend payments in the financial year 2022. Explain share buybac and cash dividends to help the BOD of SOB to choose between the two instruments. Briefly discuss THREE (3) disadvantages of issuing preference shares to the company.

Answer rating: 100% (QA)

a Journal Entries 1 Issuance of shares Date 1 March 2022 Dr Cash 150000 shares RM270 RM405000 Cr Share Capital 150000 shares RM270 RM405000 2 Return o... View the full answer