Tem Ora Ltd supplied the following information on its shareholders’ equity as at
ID: 2411301 • Letter: T
Question
Tem Ora Ltd supplied the following information on its shareholders’ equity as at
30 June 2015.
Tem Ora Ltd Balance Sheet as at 30 June 2015 (extract)
Shareholders’ equity
$
$
Capital (400,000 ordinary shares paid to $ 1.00)
400,000
Capital (100,000 7% preference shares paid to $2.00 each)
200,000
Retained earnings
165,000
Dividend equalisation reserve
150,000
Total shareholders’ equity
915,000
Additional information:
Profit after tax for the year ended 30 June 2016 was $250,000;
On 29 July 2015, buildings were revalued and increased in value by $335,000.
On 7 August 2015, a bonus share issue was made; shareholders were given one share for every eight that they held. The bonus shares were funded from the asset revaluation reserve.
On 25th June 2016, directors declared a final dividend on ordinary shares of $0.07 per share.
A decision to transfer $80,000 to the dividend equalisation reserve was made on 30 June 2016.
Required:
For the financial year ending 30 June 2016, prepare journal entries to record the above decisions.
Shareholders’ equity
$
$
Capital (400,000 ordinary shares paid to $ 1.00)
400,000
Capital (100,000 7% preference shares paid to $2.00 each)
200,000
Retained earnings
165,000
Dividend equalisation reserve
150,000
Total shareholders’ equity
915,000
Explanation / Answer
Calculations and explanations:
Amount of bonus issue = (400,000 shares*$1)/8 = $50,000
No. of shares after bonus issue = 400,000+50,000 = 450,000. Thus total dividend amount = 450,000 shares*$0.07 per share
= $31,500
S no Particulars Debit Credit 29-Jul-15 Building 335,000.00 Asset Revaluation Surplus 335,000.00 7-Aug-15 Asset Revaluation Surplus 50,000.00 Share Capital account 50,000.00 25-Jun-16 Dividends 31,500.00 Dividends payable 31,500.00 30-Jun-16 Profit & Loss appropriation account 80,000.00 Dividend equalization Reserve 80,000.00Related Questions
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