Question

PRIVATE PLACEMENT

Mining company Edgar Digging Ltd announced plans to raise $1 150 000 through a placement of 5 111 111 ordinary fully paid shares at $0.225 per share to institutional investors to fund new surveys and drilling campaigns for its copper project. Prior to this announcement the shares of Edgar Digging Ltd were trading at around $0.26.

Required

1. Distinguish between a public share float and a debt issuance.

2. Assuming that the placement above proceeded, what journal entries would be required to account for it?

Answer 1

1. Difference between a public share float and a debt issuance

• Time - Free share or Public share had enough slower to produce than an own organization
• Expenditure - Free share or Public share floats expect higher prices by the statement of declaration reports, announcement, appointment of underwriters
• Total cash raised – Free share or Public share floats normally lift more investment since limitations by the ASX on the amount proposed by individual organizations.
• Share price and direction – a separate organization may proceed near to the current value if it is made to already current bondholders, and a separate organization may be made with “trusted” organizations

2. Journal entries placement

Particular	Debit	Credit
Cash	$1 150 000
Share Captial		$1 150 000

Personal Placment or Private Placement of 5,111,111 will gave shares at  $0.225 per share to institutional investors

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