Sundowner Ltd Called for Subscriptions for 2 Million Shares

question 15

Multiple Choice

Sundowner Ltd called for subscriptions for 2 million shares. The issue price per share is $6.00 to be paid in three parts: the first payment of $3.00 is to be made on application, $2.00 is to be paid within 1 month of allotment and the remaining $1.00 is to be paid within 6 months of allotment. At the end of July, when applications close, applications for 5 million shares have been received. Two million share applicants were unsuccessful, while the remaining 3 million applicants were allotted shares on 1 August on a pro rata basis with the excess application money to be applied against the amount due on allotment. The first and final call on the shares is made on 1October. Assume all amounts on allotment and call are paid by the due date. What are the accounting entries to record these events?

Understand the treatment of unrealized losses, including their impact on taxes and comprehensive income.

Distinguish between realized and unrealized gains and losses for various types of securities.

Recognize how dividends affect the investment account under the equity method.

Understand the requirements and principles behind consolidated financial statements, including the treatment of minority interests.

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Definitions:

Capacity Analysis

The method of calculating the production capability required by an organization to adapt to the fluctuating needs for its products.

Time-Driven Activity-Based Costing

A method of costing that assigns costs to products based on the estimated time required for activities and the cost of supplying those activities.

Customer Service Department

A division within a company that handles inquiries, complaints, and other interactions with customers to ensure satisfaction and support.

Capacity Analysis

The process of determining the maximum level of output a company or production facility can achieve within a given period, considering limitations such as equipment and labor.