Irridium Ltd Had a Share Capital of 500 000 $1

question 2

Multiple Choice

Irridium Ltd had a share capital of 500 000 $1 ordinary shares fully paid.The company decided to make a new share issue of 100 000 $1 shares, payable in full on application.These shares had to be first offered to existing shareholders.Suppose that the issue was 90% subscribed by the existing shareholders by 31 January 2010, and that the other 10% of shareholders did not apply for any shares.The rights issue is non-renounceable.What would be the correct journal entry for the new issue?

• A)
• \(\begin{array}{llcc}
• \text { Dr Trust account } &\$100000 \\
• \text { Cr Bonus issue } &&\$100000\\\\
• \text { Dr Bonus issue } &\$ 10000\\
• \text {Cr Forfeited shares reserve } &&\$ 10000\\
• \text { } &\\
• \text { } &\\
• \end{array}\)
• B)
• \(\begin{array}{lll}
• \text { Dr Bank } & \$ 90000 & \\
• \text { Cr Paid up capital—ordinary } & & \$ 90000 \\
• \end{array}\)
• C)
• \(\begin{array}{llcc}
• \text {Dr Bank } & \$100000 \\
• \text { Cr Paid up capital-ordinary} &&\$90000\\
• \text {Cr Non renounceable shares account} &&\$10000\\
• \end{array}\)
• D)
• \(\begin{array}{llcc}
• \text { Dr Bank } &\$ 100000 \\
• \text { Cr Allotment } && \$ 100000\\
• \end{array}\)

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Definitions:

Production

Production is the process of creating goods and services by combining labor, materials, and technology to meet consumer demand.

Job-Order Costing

A cost accounting system that assigns costs to specific jobs or batches, used when products are distinct and easily identifiable.

Raw Materials Inventory

The total cost of all component parts currently in stock that have not yet been used in work-in-process or finished goods production.

Job-Order Costing

An accounting methodology used to assign costs to specific jobs or batches, typically in manufacturing or servicing environments.