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:

T-statistics

A measure used in statistical analysis to determine the difference between a sample statistic and its hypothesized population parameter, scaled by the standard error.

Within-group Variability

Refers to variations in observations within individual groups or categories in a dataset.

Null Hypothesis

The hypothesis that assumes no significant difference or relationship exists between specified populations or parameters.

Sample Size

The number of observations or data points that are collected from a subset of a larger population for the purposes of statistical analysis.