West Ltd needs to raise funds for mining projects in Northern Territory. It currently has share capital of $3 million and has issued 1.5 million shares. The directors have decided to make a non-renounceable rights issue to existing shareholders of 300 000 new shares at an issue price of $15 per share. Rainy Day Ltd, a firm of finance brokers has agreed to fully underwrite the rights issue. West Ltd issued a prospectus on 1 April 2022 and applications closed on 3 May 2022. Costs associated with the rights issue and the eventual issue of the shares were $30 000. Required 1. Prepare the journal entries for the rights issue and the subsequent share issue made by West Ltd, assuming that 80% of the rights were exercised by the due date. 2. Prepare the journal entries assuming that the rights issue was not underwritten and that any unexercised rights lapsed

West Ltd needs to raise funds for mining projects in Northern Territory. It currently has share capital of $3 million and has issued 1.5 million shares. The directors have decided to make a non-renounceable rights issue to existing shareholders of 300 000 new shares at an issue price of $15 per share. Rainy Day Ltd, a firm of finance brokers has agreed to fully underwrite the rights issue. West Ltd issued a prospectus on 1 April 2022 and applications closed on 3 May 2022. Costs associated with the rights issue and the eventual issue of the shares were $30 000. Required 1. Prepare the journal entries for the rights issue and the subsequent share issue made by West Ltd, assuming that 80% of the rights were exercised by the due date. 2. Prepare the journal entries assuming that the rights issue was not underwritten and that any unexercised rights lapsed

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 8P

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