Share capital- preference, 2% cumulative, $80 par (500,000 shares authorized, 10
ID: 2460571 • Letter: S
Question
Share capital- preference, 2% cumulative, $80 par (500,000 shares authorized, 10,000 shares issued) $800,000
Share capital- preference, 5% non-cumulative, $10 par (400,000 shares authorized, 20,000 shares issued) $200,000
Share capital- ordinary,$20 par (900,000 shares authorized, 200,000 shares issued) $4,000,000
Share Premium $400,000 Retained earnings $8,400,000
Net profit for the year $550,000
Note these shares were issued on 1 Jan 2013 During the year , the corporation completed a number of transactions affecting the shareholders’ equity.
2014
Feb 18 Purchased 90,000 shares of treasury ordinary share for $8 per share
Apr 02 Sold 25,000 shares of treasury ordinary share for $11 per share
Jul 05 Issued 40,000 shares of share capital-preference, 2% cumulative at $81
Aug 06 Issued 300,000 shares of share capital-ordinary at $21, receiving Cash
Oct 01 Issued 60,000 shares of share capital-preference, 5% non-cumulative at $12
Nov 07 Sold 45,000 shares of treasury ordinary share for $7.5 per share
Dec 30 Declared $300,000 cash dividends in total for shareholders with date on record of 15 Jan 2015
The company did not declare any dividends for the last year
2015
Feb 02 Paid the cash dividends Calculate the number of outstanding shares of each class of shares at the year end
Calculate the dividend for each class of shares for the year of 2014 Jounalize the entries to record the transactions
Prepare a statement of retained earning for the year ended 31 December 2014
Prepare the Shareholders’ Equity section of the statement of financial position as at 31 December 2014
Explanation / Answer
18/feb/2014 investment a/c dr. 720000
bank a/c cr. 720000
(being investment purchased)
02/april/2014 bank/cash a/c dr 275000
investment cr. 200000
profit on sale of investment cr. 75000
(being investment sold)
15/july/2014 bank a/c dr. 3240000
2% PSC (cumulative) cr. 3200000
security premium cr. 40000
(being 2% cumulative PSC issued)
06/aug/2014 cash a/c dr. 6300000
Equity share capital cr. 6000000
security premium cr. 300000
(being normal Equity share issued)
01/oct/2014 bank a/c dr. 720000
5% PSC (non-cu,ulative) cr. 600000
security premium cr. 120000
(being 5% non-cumulative PSC issued)
07/nov/2014 bank a/c dr. 337500
loss on sale of investment dr. 22500
investment cr. 360000
( being investment sold)
CALCULATION OF DIVIDEND:::
note: no dividend is declared for the year ended 31/12/2013, so only dividend of cumulative PSC is carried forwarded and non-cumulative is lapsed.
ON YEAR ENDED 31/12/2014::
2% cumulative PSC:: 1/1/2013 to31/12/2014 10000*80*2%*2 years 32000
05/06/20014 to 31/12/2014 40000*80*2%*209days/365days 36646
total 68646
5% non-cumulative PSC 1/1/2014 to 31/12/2014 20000*10*5% 10000
1/10/2014 to 31/12/2014 60000*10*5%*3month/12months 7500
total 17500
balance remaining for ordinary equity share :: total dividend distributed- dividend for PSC
300000-86146 = 213854
(note:::: total dividend of PSC 86146 is total sum of 68646+17500)
02/02/2015 dividend a/c dr 300000
cash cr. 300000
(being dividend paid on cash)
Statement of RETAINED EARNING::
opening balance 840000
+ profit of 2013 550000
- dividebd declared & paid ( 300000)
CALCULATION OF SECURITY PREMIUM::
OPENING BALANCE 400000
ADDED DURING THE PERIOD 820000
TOTAL 1220000
SHAREHOLDERS FUND
Equtiy Share Capital(authorised-900000) 500000@20 1000000
2% cumulative PSC(Authorised-500000) 50000@80 4000000
5% non cum PSC(Authorised-400000) 80000@10 800000
security premium 1220000
Retained Earning 1090000
Net Profit For year ended 31/12/2014 52500
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