1st Jan-31 Dec reporting period Year 2022: At the beginning of the reporting period, it has $5 million of share capital and 1.5 million ordinary shares outstanding. On 1 April 2022, the company announces a bonus issue of 2 shares for every share held on that date. By the end of the year Himalaya Ltd.’s profit attributable to ordinary shareholders amounts to $5,250,000. Year 2023: Himalaya Ltd. needs to raise funds for expansion of its business. Ms. Natasha Romanoff, CEO and Mr. Clint Barton, CFO have decided to make a non-renounceable rights issue to existing shareholders of 250,000 new shares at an issue price of $20 per share. Goldman Sachs has agreed to fully underwrite the rights issue. Himalaya Ltd issued a prospectus on 1 February 2023 and applications closed on 3 April 2023. Costs associated with the rights issue and the eventual issue of the shares were $45,000. Required For year ending December 2023: Prepare the journal entries for the rights issue and the subsequent share issue made by Himalaya Ltd., assuming that 75% of the rights were exercised by the due date. Prepare the journal entries assuming that the rights issue was not underwritten and that any unexercised rights lapsed.
1st Jan-31 Dec reporting period
Year 2022:
At the beginning of the reporting period, it has $5 million of share capital and 1.5 million ordinary shares outstanding. On 1 April 2022, the company announces a bonus issue of 2 shares for every share held on that date. By the end of the year Himalaya Ltd.’s profit attributable to ordinary shareholders amounts to $5,250,000.
Year 2023:
Himalaya Ltd. needs to raise funds for expansion of its business. Ms. Natasha Romanoff, CEO and Mr. Clint Barton, CFO have decided to make a non-renounceable rights issue to existing shareholders of 250,000 new shares at an issue price of $20 per share.
Goldman Sachs has agreed to fully underwrite the rights issue. Himalaya Ltd issued a prospectus on 1 February 2023 and applications closed on 3 April 2023. Costs associated with the rights issue and the eventual issue of the shares were $45,000.
Required
For year ending December 2023:
-
Prepare the
journal entries for the rights issue and the subsequent share issue made by Himalaya Ltd., assuming that 75% of the rights were exercised by the due date. -
Prepare the journal entries assuming that the rights issue was not underwritten and that any unexercised rights lapsed.
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