Q11: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of...

Q11: Suppose a firm issues a 1,000 Convertible Preference Shares for with a par value of $100 each. Each preference share is convertible into 5 Ordinary Shares with a par value of $5. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $200,000. Assume that the maturity date of the Convertible Shares has now arrived and the Convertible Preference Shares will be converted into Ordinary Shares.

The Debit Entry to the “Share Capital – Preference” account on the date of conversion will be for an amount of:

a. $100,000

b. $250,000

c. $25,000

d. $10,000

e. None of these answers

Q12: Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000. Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares.

The Debit Entry to the “Bonds Payable” account on the date of conversion will be for an amount of:

Q13: Suppose a firm earns Net Income of $1,200,000. The company pays an Ordinary Dividend of $400,000 and a Preference Dividend of $200,000. Throughout the financial year, the firm has 500,000 Ordinary Shares and 200,000 Preference Shares. The firm’s Earnings Per Share (EPS) is:

Q14: Suppose a firm earns Net Income of $1,000,000. The company does not pay dividends.

At the start of the financial year the firm had 530,000 Ordinary Shares. On 31 March, the firm issued 80,000 Ordinary Shares for Cash. On 30 November, the firm issued a further 120,000 Ordinary Shares for Cash.

The number of Ordinary shares used in the calculation of Earnings Per Share (EPS) is:

Q15: Suppose a firm issues a single bond with a face value of $100,000 which is Convertible into 10,000 Ordinary Shares with a Par Value of $1. The credit entry to “Share Premium – Conversion Equity” on the date of issue was for $20,000. Assume that the maturity date of the bonds has now arrived and the bonds will be converted into Ordinary Shares.

The Debit Entry to the “Share Premium – Conversion Equity” account on the date of conversion will be for an amount of:

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ekkarill92 answered 1 year ago

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