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In: Accounting

The following balances in its shareholders’ equity at 1 January: Contributed equity (450 0000 ordinary shares)...

The following balances in its shareholders’ equity at 1 January:

Contributed equity (450 0000 ordinary shares)   $2 100 000

Retained earnings 2 225 000

During the year the business had the following transactions

1 Mar. Issued 200 000 ordinary shares for cash at $8 per share.

1 Jul.   Declared a 1 for 10 share dividend, payable 1 August. The shares were trading at $7 per share on 1 July.


15 Aug.    Declared a $0.50 per share cash dividend of record on 1 September, payable 15 September.


1 Oct.   Declared a $0.50 per share cash dividend of record on 1 September, payable 15 September.

31 Dec. Bought back 6000 ordinary shares for $45 000. Calculated total comprehensive income for the year to be $520 000.


Required
a   Prepare the journal entries to record the transactions.

b   Prepare the company's 31 December shareholders’ equity section.

c   Calculate earnings per share for the year.

Solutions

Expert Solution

Answer -

A Journal Entries
Date Particulars Dr/Cr Debit Amount Credit Amount
31-Mar Cash / Bank Account Dr 3200000
To Common Stock A/c 3200000
(Being common stock issued)
1-Aug Retained Earning Account Dr 455000
To Common Stock 455000
(Being dividend stock issued)
15-Aug Dividend Expense Account Dr 357500
To Dividend Payable A/c 357500
(Being dividend declared on 715000 outstanding shares @ $ .50 per shares, refer to notes 1)
1-Sep Dividend Expense Account Dr 357500
To Dividend Payable A/c 357500
(Being dividend declared on 715000 outstanding shares @ $ .50 per shares, refer to notes 1)
15-Sep Dividend Payable Account Dr 715000
To Cash / Bank Account 715000
( 2 cash dividend of $ 0.50 paid)
31-Dec Common Stock Dr 45000
To Cash / Bank Account 45000
(Being 6000 shares bought back)
B Notes Share Equity Statement As On 31 Dec
1 Date Particulars No. of Shares Amount No of shares outstanding
1-Jan Contributed Equity 450000 2100000 450000
1-Mar Issued Shares 200000 1600000 650000 (8 Per share)
1-Jul 1 for 10 shares dividend 65000 455000 715000 (refer to working below)
31-Dec Bought Back Shares -6000 -45000 709000
Total 709000 4110000
2 Retained Earning As On 31 Dec
1-Jan Opening Balance 225000
1-Aug Stock Dividend Issued -455000
31-Dec Comprehensive Income for the year 520000
Balance at the end of year 290000
C EPS for the year
31-Dec No of Outstanding Common Shares 709000
Comprehensive Income 520000
EPS (Earning Per Shares) 520000/709000
EPS (Earning Per Shares)                   0.73
3 Calculation of Stock Dividend
No of shares outstanding on 1 July
1-Jan Contributed Equity 450000
1-Mar Issued Shares 200000
650000
Basis 1 shares for 10 =650000/10
No of shares to be issued 65000
Value of shares to be issued =65000*7
455000

ekkarill92 answered 1 year ago
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