Motion Plc Issued €5 Million in Redeemable Preference Shares in a Private

question 42

Multiple Choice

Motion Plc issued €5 million in redeemable preference shares in a private placement on 1 July 2012.The shares are redeemable on 30 June 2016,have no voting rights and offer a fixed rate of return to the holder.The shares are redeemed as expected with a fresh issue of shares.What are the accounting entries and note disclosures to record the transactions on 1 July 2012 and 30 June 2016?

• A) \(\text { 1 July 2012: }\)
• \(\begin{array}{|l|l|r|r|}
• \hline \mathrm{Dr} & \text { Bank trust } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \\
• \hline & & & \\
• \hline
• \end{array}\)
• \(30 \text { June 2016: }\)
• \(\begin{array}{|l|l|r|r|}
• \hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \\
• \hline
• \end{array}\) Note disclosure: redeemable preference shares have characteristics different to ordinary shares and so have been disclosed separately in the shareholders' funds section of the statement of financial position.
• B) \(\text { July 2012: }\)
• \(\begin{array}{|c|l|r|r|}
• \hline \mathrm{Dr} & \text { Application } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Application } & & 5000000 \\
• \hline
• \end{array}\)
• \(30 \text { June 2016: }\)
• \(\begin{array}{|l|l|r|r|}
• \hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Share capital } & & 5000000 \\
• \hline
• \end{array}\) Note disclosure: redeemable preference shares have characteristics different to ordinary shares and so have been disclosed separately in the shareholders' funds section of the statement of financial position.
• C) \(\text { I July 2012: }\)
• \(\begin{array}{|l|l|r|l|}
• \hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \\
• \hline & & & \\
• \hline
• \end{array}\)
• \(30 \text { June 2016: }\)
• \(\begin{array}{|c|l|r|r|}
• \hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Cash } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Share capital } & & 5000000 \\
• \hline
• \end{array}\) Note disclosure: redeemable preference shares have the characteristics of debt and so have been classified as liabilities in the statement of financial position.
• D) \(\text { 1 July 2012: }\)
• \(\begin{array}{|c|l|r|r|}
• \hline \mathrm{Dr} & \text { Cash at bank } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Share capital-preference shares } & & 5000000 \\
• \hline & & & \\
• \hline
• \end{array}\)
• \(30 \text { June 2016: }\)
• \(\begin{array}{|l|l|r|r|}
• \hline \mathrm{Dr} & \text { Share capital-preference shares } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Capital redemption reserve } & & 5000000 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Capital redemption reserve } & 5000000 & \\
• \hline \mathrm{Cr} & \text { Cash at bank } & & 5000000 \\
• \hline
• \end{array}\) Note disclosure: redeemable preference shares are to be redeemed on 30 June 2008.

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Definitions:

FET Switched Circuits

Electronic circuits where field-effect transistors (FETs) are used as switches to control electrical current flow.

Characteristic Impedance

A measure of how a conductor appears (regardless of length) to a high-frequency signal; for instance, a truck J1939 data backbone has a characteristic of 120 ohms. It cannot be measured with an ohmmeter.

J1939 Data Bus

A communication protocol based on CAN (Controller Area Network) used for the electronic control system of heavy-duty vehicles to transmit data and control information among various vehicle components.

Field Effect Transistor (FET)

An electronic relay switch of which there are two types: N-channel and P-channel. A gate (terminal) is used to alter channel status. Channel allows current to flow or not to flow from the source terminal to the drain terminal. Used on many current truck electronic systems because of their ability to allow a very small current to control a high current.