Motion Ltd Issued $5 Million in Redeemable Preference Shares in a Private

question 4

Multiple Choice

Motion Ltd 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 2012and 30 June 2016?

• A) 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) 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) Note disclosure: redeemable preference shares have the characteristics of debt and so have been classified as liabilities in the statement of financial position.
• D) Note disclosure: redeemable preference shares are to be redeemed on 30 June 2008.

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Definitions:

Call Increases

The rise in the value or price of call options, which are contracts granting the right to purchase a stock at a specified price within a certain period.

Value

The monetary, material, or assessed worth of an asset, good, or service.

Intrinsic Value

The true, inherent, and objective value of an asset, independent of its current market price, determined through fundamental analysis.

Market Price

The current price at which an asset or service can be bought or sold.