Question

Prepare general journal entries to record the following unrelated transactions:

(a) The payment of a declared final ordinary share dividend of $50,000

(b) The transfer of $350,000 to dividend equalisation reserve

(c) The revaluation of land upwards by $ 190,000 and a subsequent bonus issue of ordinary shares for $150,000.

(d) The declaration of a final dividend of $0.0375cents per share on 2,500,000 $1.00 ordinary shares.

Answer 1

The Journal entries are as given as follows:

a)	Dividend Payable A/c	50000
	Cash A/c		50000
	(Paid the declared final ordinary share dividend)
b)	General Reserve A/c	350000
	Dividend Equalisation Reserve A/c		350000
	(Transferred $350000 to Dividend Equalisation reserve)
c)	Land A/c	190000
	Revaluation Surplus A/c		190000
	(Land Revalued upwards by $190000)
	Free Reserves A/c	150000
	Share Capital A/c		150000
	(Bonus issue of ordinary shares for $150000)
d)	Retained Earnings A/c	93750
	Dividend Payable A/c		93750
	(Final Dividend of $0.0375 per share declared on 2500000 shares)

NOTE:

1. We have assumed that for the purpose of revaluation of land, Revaluation method has been used.

2. Revaluation surplus cannot be utilised for the purpose of issuing bonus shares. We have assumed that the free reserves are sufficient to issue the bonus shares.