On 13 March 2013, Mining company Aeon Metals Ltd announced plans to raise $1 150

Question

On 13 March 2013, Mining company Aeon Metals Ltd announced plans to raise $1 150 000 through a placement of 5 227 273 ordinary fully paid shares at $0.22 per share to institutional investors to fund new surveys and drilling campaigns for its copper project. Prior to this announcement the shares of Aeon Metals Ltd were trading at around $0.26.

(Based on information from Aeon Metals, www.aeonmetals.com.au.)

Required

A. Distinguish between a public share float and a private placement.

B. Assuming that the placement above proceeded, what journal entries would be required to account for it?

Explanation / Answer

A.

The main differences between a public share float (share capital raised by a public company by way of advertisements and disclosure documents to encourage public subscription for shares) and a private placement (shares issued privately to institutional investors) are:

B.

            Cash    Dr                                                        1 150 000

                Share Capital                                               Cr                                        1 150 000

            (Private placement of 5,227,273 shares at $0.22 per share)

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