Chapter 11

Question 1

Bonus issue vs rights issue

Answer 1

Bonus issue: an issue of fully paid shares to existing shareholders, free of charge, in proportion to their existing shareholdings

Rights issue: new shares are offered to existing shareholders in proportion to their existing shareholding, usually at a discount to the current market price

Question 2

If a company has a debit balance on its income tax payable account, does it owe or is it owed money?

Answer 2

It owes money

Question 3

A provision made in 20x4 for 10,000 is claimed in 20x8 for an eventual 12,000. Is this classified as a 2,000 or 12,000 expense?

Answer 3

2,000