Question

a)Based on MFRS 2 Share Based Payment, describe the general rules to record shares issued in exchange for an asset.

(b)Sintok Niaga Bhd issues 200,000 shares at RM1 each during the year ended 31 December 2019. 500,000 applications with full payment are received on 31 October 2019. The shares are subsequently allotted to the successful applicants on 31 December 2019. The money of the unsuccessful application were returned back to the respective applicants.

REQUIRED:

Prepare the journal entries to record the transactions.

(c)TTG Bhd had the following transactions pertaining to its ordinary shares during the first year of operations.

1 Jan     Issued 80,000 shares for cash at RM6 per share.

1 Mar       Issued 5,000 shares to lawyer in payment of a bill for RM40,000 for services rendered in helping the company to incorporate.

1 July    Issued 30,000 shares for cash at RM8 per share.

1 Sep     Issued 60,000 shares for cash at RM10 per share.

REQUIRED:    

Prepare the journal entries to record the transactions.

(d)Savonn Bhd has outstanding 3,000,000 ordinary shares. The balanced in its contributed share capital and retained earnings accounts at 1 January 2019 were RM60,000,000 and RM24,000,000, respectively. During 2019, the company’s net income was RM4,700,000. A cash dividend of RM0.60 per share was declared on 5 May 2019, and was paid on 30 June 2019. A 6% share dividend was declared on 30 November 2019, and distributed to shareholders of record on 31 December 2019. The market price of the shares has been as follows:

31 October 2019        RM31

30 November 2019    RM34

31 December 2019    RM38

REQUIRED:

(a) Prepare the journal entries to record the declaration and payment of the cash dividend and the share dividend.

(b) Prepare the Statement of Changes in Equity for the year ended 31 December 2019.

Answer 1

a)

Standard on  Share-based Payment requires an entity to recognise share-based payment transactions in financial statements, including transactions with the employees or other parties to be settled in cash, assets, or equity.

A share-based payment is a transaction in which the entity receives goods or services either as consideration for its equity instruments or by incurring liabilities for amounts based on the price of the entity's shares or other equity instruments of the entity. The accounting requirements for the share-based payment depend on how the transaction will be settled, that is, by the issuance of (a) equity, (b) cash, or (c) equity or cash.

The issuance of shares or rights to shares requires an increase in a component of equity. IFRS 2 needs off-setting debit entry to be expensed when the payment for goods or services does not represent an asset. When it is asset, asset has to be increased.

b)	Journal			Amount in RM
	Date	Particular	Amount (Dr.)	Amount(Cr.)
	31-Oct	Bank A/c………………..Dr	500000
		To Share Application A/c		500000
		(Being the application money received on 500000 shares)
	31-Dec	Share Application A/c Dr	500000
		To Share Capital		200000
		To Bank A/c		300000
		(Being shares alloted and excess money refunded)
c)
	Journal			Amount in RM
	Date	Particular	Amount (Dr.)	Amount(Cr.)
	01-Jan	Bank A/c………………..Dr (80000*6)	480000
		To Share Capital A/c (Assumed - Face Vale RM 1)		80000
		To Share Premium A/c		400000
		(Being shares issued for cash at premium)
	01-Mar	Legal Expense A/c………………..Dr	40000
		To Share Capital A/c (Assumed - Face Vale RM 1)		5000
		To Share Premium A/c		35000
		(Being shares issued to lawyer in payment of a bill for RM40,000 for services rendered)
	01-Jul	Bank A/c………………..Dr (30000*8)	240000
		To Share Capital A/c (Assumed - Face Vale RM 1)		30000
		To Share Premium A/c		210000
		(Being shares issued for cash at premium)
	01-Sep	Bank A/c………………..Dr (60000*10)	600000
		To Share Capital A/c (Assumed - Face Vale RM 1)		60000
		To Share Premium A/c		540000
		(Being shares issued for cash at premium)
d)
	Journal			Amount in RM
	Date	Particular	Amount (Dr.)	Amount(Cr.)
	05-May	Retained Earning…………Dr (30000000*8)	1,800,000
		To Dividend Payable A/c		1,800,000
		(Being Cash Dividend declared)
	30-Jun	Dividend Payable A/c………………..Dr	1,800,000
		To Bank		1,800,000
		(Being Cash Dividend paid)
	30-Nov	Retained Earning…………Dr (3000000*20*6%)	3,600,000
		To Share Capital A/c (Face Value 20)		3,600,000
		(Being shares issued for cash at premium)

Statement of Change in Equity
Particulars	Share Capital (No.)	Share Capital (RM)	Retained Earning	Security Premium	Total
Balance at 1/1/2019	3,000,000	60,000,000	24,000,000		87,000,000
					-
Changes in Equity for the year					-
					-
					-
					-
					-
					-
Income for the year			4,700,000		4,700,000
Less - Cash Dividend for the year			(1,800,000)		(1,800,000)
	3,600,000		(3,600,000)		-
					-
Balance at 12/31/2019	6,600,000	60,000,000	23,300,000		89,900,000