Question

1. If a rights issue is described as non-renounceable, what does this mean?

a) If the existing shareholders do not exercise their rights, the rights can be sold to a third party, or allowed to lapse

b) "If the existing shareholders do not exercise their rights, the rights will be transferred to a third party"

c) If the existing shareholders do not exercise their rights, their existing shareholding must be sold within 12 months

d) If the existing shareholders do not exercise their rights, the rights will lapse

2. On 1 July 2020 Whiterun leased a boat to Riverwood Ltd. In the lease agreement, Riverwood Ltd agreed to guarantee $7 000 residual value, $1 000 less than what Whiterun had estimated.The lease payment is $20,000 for three years. Lease payments are to be made annually and in arrears. The interest rate implicit in the lease for Whiterun Ltd is 5%. What is the amount of Whiterun Ltd's first year's interest revenue?

a) $61376 b) $3069 c) $41376 d) $2068

Answer 1

1) "D"

A non-renounceable rights issue refers to an offer issued by a corporation to shareholders to purchase more shares of the corporation (usually at a discount). Unlike a renounceable right, a non-renounceable right is not transferable, and therefore cannot be bought or sold.

2) "B" $ 3,069 based on the calculation attached.