Question

The following CR account balances appeared in the balance sheet of Johns Jacks Ltd as at 30 June 2007:

$ Paid-up capital (1 000 000 ordinary shares) 1 000 000
Retained profits 350 000
Asset revaluation reserve 600 000
General Reserve 50 000

The following selected transactions took place during the financial year ended 30 June 2007.
1 July: A 1:4 bonus share dividend, valued at $2.00 per share, is declared (using funds from the asset revaluation reserve account) and the shares are issued immediately.

1 October: Johns Jacks Ltd issues a prospectus offering 200 000 shares at $1.50 per share, all payable at the time of application.

30 November: Applications and money are received for 150 000 shares. It is decided to go ahead with the offer and the shares are issued immediately to the new shareholders.

31 January: The directors declare an interim dividend of 15 cents per share payable to all ordinary shareholders.

28 February: The interim dividend is paid.

30 June: A final dividend of 10 cents per share is declared (to be paid to all ordinary shareholders in September 2007).

After adjusting and closing entries, the credit balance in the profit and loss summary account is $250 000. This amount represents the final profit after taxation

Required Prepare general journal entries to record these events and any further closing entries that are required. Also, calculate the total shareholders’ equity of Johns Jacks on 30 June 2007.

Answer 1

		Amount in $
Date	Description	Debit	Credit
1-Jul-06	Asset Revaluation Reserve	500,000
	Share Premium		250,000
	Paid up Capital		250,000
1-Oct-06	No entry
30-Nov-06	Cash	225,000
	Share Premium		75,000
	Paid up Capital		150,000
31-Jan-07	Dividend	210,000
	Dividend Payable		210,000
28-Feb-07	Dividend Payable	210,000
	Cash		210,000
30-Jun-07	Dividend	140,000
	Dividend Payable		140,000
30-Jun-07	Profit & Loss Summary Account	250,000
	Retained Earnings		250,000

Total Shareholders' equity of Johns Jacks on 30 June 2007
	Paid up Capital	Amount $
1-Jul-06	Opening Paid up Capital	1,000,000
1-Jul-06	Bonus Shares	250,000
30-Nov-06	Fresh Capital issued	150,000
30-Jun-07	Closing Paid up Capital	1,400,000
	Asset Revaluation Reserve
1-Jul-06	Opening Balance	600,000
1-Jul-06	Adjusted for Bonus Shares	500,000
30-Jun-07	Closing Balance	100,000
	Retained Profits
1-Jul-06	Opening Balance	350,000
30-Jun-07	Prfoit for the year b/f	250,000
30-Jun-07	Closing Balance	600,000
	Share Premium
1-Jul-06	Opening Balance	-
1-Jul-06	Bonus Shares	250,000
30-Nov-06	Fresh Capital issued	75,000
30-Jun-07	Closing Balance	325,000
30-Jun-07	General Reserve	50,000
	Total Equity & Reserves	2,475,000