FAC2601 ASSIGNMENT 1 SEMSTER 2 2023
ASSESSMENT 01 (20 marks) (180 minutes)
Answer the following theoretical discussion type questions. Indicate your
question number and discuss the question in detail and provide all necessary
calculations were applicable.
1. Capital contributed by the shareholders of a company is known as share
capital. When companies require additional funds from the public, the company
would normally use the services of a financial institution to handle the
additional share issue on their behalf.
Craft Ltd underwrites an issue of 250 000 ordinary shares at R3 each in Sontech
Ltd.
Craft Ltd charges commission of 8% for their services. The public took up 235
000 of the shares that were on offer.
REQUIRED:
a) Please explain and discuss whether Craft Ltd has any liability towards
Sontech
Ltd, and if so, what this will amount to?
(3)
b) Calculate the commission payable to Craft Ltd?
(1)
2. The International Financial Reporting Standards (IFRS) are accounting
standards that are issued by the International Accounting Standards Board
(IASB) with the objective of providing a common accounting language to
increase transparency in the preparation of financial information. Entities that
are owner managed and has no public accountability may use IFRS for SME’s
(Small and Medium-sized entities).
REQUIRED:
Please discuss what is meant with the term Public Accountability?
(2)
, 1. Capital contributed by the shareholders of a company is known as share capital.
a) Craft Ltd's liability towards Sontech Ltd:
Total shares issued = 250,000 Shares taken up by the public = 235,000
Number of shares not taken up by the public = 250,000 - 235,000
= 15,000 shares
Since Craft Ltd underwrote the entire issue, it is liable to take up these 15,000 shares
that were not bought by the public.
Now, the price of each share is R3. Therefore, the total amount Craft Ltd is liable for =
15,000 shares x R3/share = R45,000.
In conclusion, Craft Ltd has a liability towards Sontech Ltd, which amounts to R45,000
as they are required to buy the remaining shares which were not taken up by the
public.
b) Commission payable to Craft Ltd:
The total amount from the share issue = 250,000 shares x R3/share = R750,000.
Commission rate = 8%
Commission payable = 8% of R750,000
= 0.08 x R750,000
= R60,000.
Therefore, the commission payable to Craft Ltd is R60,000.
