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Which TWO of the following are true for an entity raising equity finance using a rights issue rather than a placing of equity shares to new investors?

Options:

The administration is more complex and therefore likely to be more costly.

The shares will sell at a higher price and therefore generate more funds.

The voting rights of existing shareholders will be unaffected if the shareholders take up their rights.

The cost of underwriting will be lower because the risk of the issue is lower.

The issue will widen the base of shareholders if all shareholders take up their rights.

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Question 2

Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?

Options:

Major customer

Provider of finance

Managing Director

Major supplier

Question 3

Entity A entered into a 3 year operating lease on 1 April 20X3. The rentals are £5,000 a year payable in advance with an additional payment of $1,800 payable on 1 April 20X3.

The rental expense to be included in the statement of profit or loss for the year ended 31 December 20X3 will be:

Options:

$4,200

$5,000

$6,800

$5,600

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F2 Advanced Financial Reporting Questions and Answers

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