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ich one of the following options shows the correct amount of commission paid to the underwriter for the issue of ordinary shares as at 1 January 2017?...

Which one of the following options shows the correct amount of commission paid to the underwriter for the issue of ordinary shares as at 1 January 2017? 


1. R2 250 

2. R6 000 

3. R10 500 

4. R3 000 



Ricor Ltd has a financial year end of 31 January. The company has the following share capital structure: 


Authorised share capital: 

500 000 ordinary shares 

200 000 10% preference shares 


Issued share capital: 

350 000 ordinary shares valued at R550 000, 150 000 of these shares remained unchanged for the full 

year while the remainder was allotted and issued on 1 January 2017 at a consideration of R400 000 by 

an underwriter at a 1.5% commission which was paid on the same date. However, 210 000 applications 

were received for these shares. 


120 000 10% preference shares, 60 000 of these shares remained unchanged for the full year and were 

issued for R120 000 while the remainder were allotted and issued on 31 July 2016 at a consideration of 

R180 000. 


On 31 January 2017, the board of Ricor Ltd decided to issue capitalisation shares to ordinary 

shareholders in the ratio of 1 share for every 4 ordinary share held at R2,20 per share. The capitalisation 

issue to ordinary shareholders was funded from retained earnings.  


The preference shareholders were paid a cash dividend. 


According to the company's solvency and liquidity test, it had sufficient cash and retained earnings to 

pay the dividends to ordinary and preference shareholders. 

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