Which one of the following share issues would be classified as a liability? a) An issue of 10,000 irredeemable preference shares with a coupon rate of 5% per annum. The dividend is mandatory and if it is unpaid at the end of the period then it becomes cumulative in the following period b) An issue of 50,000 ordinary shares c) An issue of 20,000 shares which are redeemable only at the option of the preference shareholder. A dividend is payable on these shares at the same amount per share as any ordinary dividend declared in the year and is not mandatory d) A buyback of £100,000 of a company's own ordinary share capital What is the correct option?
Which one of the following share issues would be classified as a liability? a) An issue of 10,000 irredeemable preference shares with a coupon rate of 5% per annum. The dividend is mandatory and if it is unpaid at the end of the period then it becomes cumulative in the following period b) An issue of 50,000 ordinary shares c) An issue of 20,000 shares which are redeemable only at the option of the preference shareholder. A dividend is payable on these shares at the same amount per share as any ordinary dividend declared in the year and is not mandatory d) A buyback of £100,000 of a company's own ordinary share capital What is the correct option?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which one of the following share issues would be classified as a liability?
a) An issue of 10,000 irredeemable
5% per annum. The dividend is mandatory and if it is unpaid at the end of
the period then it becomes cumulative in the following period
b) An issue of 50,000 ordinary shares
c) An issue of 20,000 shares which are redeemable only at the option of the
preference shareholder. A dividend is payable on these shares at the
same amount per share as any ordinary dividend declared in the year and
is not mandatory
d) A buyback of £100,000 of a company's own ordinary share capital
What is the correct option?
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