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
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.
Underwriting... View the full answer