Lehman Ltd Has 50 000, 10 % Cumulative Preference Shares

question 9

Multiple Choice

Lehman Ltd has 50 000, 10 % cumulative preference shares fully paid to $2.00 which it wishes to replace with 50 000, 6 % cumulative preference shares fully paid to $2.00.It can do this provided it pays a penalty equal to 5% of the issued price of the preference shares.The penalty is by way of a special dividend.
-Lehman Ltd classifies these preference shares as equity.The penalty payment will be recognised in Lehman's financial statements as:

• A)in the profit or loss statement as an expense of $2 500
• B)in the profit or loss statement as an expense of $5 000
• C)in the changes in equity statement as a reduction in retained profits of $2 500
• D)in the changes in equity statement as a reduction in retained profit of $5 000

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Definitions:

Learning

The process of acquiring new understanding, knowledge, behaviors, skills, values, attitudes, or preferences through study, experience, or instruction.

Cognitive Psychology

is the study of mental processes such as "attention, language use, memory, perception, problem-solving, creativity, and thinking."

Tolman's Theories

The psychological theories proposed by Edward C. Tolman, emphasizing the importance of cognitive processes and expectations in learning, suggesting that behavior is purposeful and goal-directed.

Excitatory Potential

The potential of a neuron to become activated and fire an action potential, often influenced by the summation of excitatory and inhibitory inputs.