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1.For each of the following events, identify the impact on a company's assets, liabilities and shareholders' equity:

declare a dividend

pay a dividend

general reserve

revaluation surplus

make a bonus issue of shares

make a rights issue of shares

applied the lower of cost or net realisable value rule to some damaged inventory

recognised taxation expense for the year (to be paid in the following year)

a controlling interest in another company was acquired by purchasing shares in that company in exchange for land and cash (the value of the shares received for land was greater than the book value of the land)

issued 100 000 $10 7% debentures to raise funds for expansion into new markets

2.If you were considering buying shares in a company, and both ordinary and preference shares were available, what factors would you take into account in making the choice? What types of preference shares can companies offer?

3.Calculate the profit of a company for a year given that:

• assets went up by $33 400 (part of this increase was the result of land being re-valued upwards by $20 000)
• liabilities went down by $15 700
• shareholders contributed $5 000 in new capital
• dividends distributed to shareholders amounted to $7 500 (these dividends were declared and paid in the current year)
• debt of $12 000 was reduced by an exchange for an equivalent amount of ownership capital.

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