Question

At 1 July 2019, the balance in the Retained Earnings account of Melbourne Ltd was $3 500 000. The company’s share capital at the 1 July 2019 comprises 400 000 6% preference shares issued for $2.00 per share and 1 400 000 ordinary shares fully paid at $1 per share.
During the year ended 30 June 2020, the following events occurred:
1. On 1 February 2020, the directors declared and paid an interim ordinary dividend of $124 000 from retained earnings.
2. On 14 March 2020, the directors issued 20 000 ordinary bonus shares fully paid at $1.40 per share from retained earnings.
3. Profit for the year was $3 300 000.
4. On 30 June 2020, the directors declared a final ordinary dividend of $480 000. A dividend was also declared on the preference shares.
5. On 30 June 2020, the directors resolved to transfer $1 200 000 to a general reserve from retained earnings, and to transfer $2 000 000 from a previously created plant maintenance reserve back to retained earnings.

Required:

Prepare the journal entries for Twister Ltd for the years ending 30 June 2019 and 2020.

Answer 1

Date	Account Titles	Debit $	Credit $
1 February ,2020	Retained earnings	124,000
	Interim Ordinary dividend payable		124,000
1 February ,2020	Interim Ordinary dividend payable	124,000
	Cash		124,000
14 March,2020	Retained earnings ( 20,000 x 1.40 )	28,000
	Ordinary Share Capital ( 20,000 x 1)		20,000
	Paid in capital in excess of par		8,000
30 June,2020	Retained earnings	528,000
	Final Ordinary dividend payable		480,000
	Preference Dividend Payable		48,000
	(400,000 x 2 x 6% )
30 June,2020	Retained earnings	1,200,000
	General Reserve		1,200,000
	Plant Maintenance reserve	2,000,000
	Retained earnings		2,000,000