ACCT10002: Tutorial 9 In-class Exercises SUGGESTED SOLUTIONS

Question 1: (PSA 10.1)

Marge Arena Ltd
(a)
$ $
10 Jan No entry
1 Mar Cash Trust 400,000
Application 400,000
Being application monies received (20,000 X $20)

2 Mar. Application 400,000

Share Capital 400,000
Being allotment of shares (20,000 X $20)

2 Mar. Cash at bank 400,000

Cash Trust 400,000
Being the transfer of funds from trust a/c to coy bank a/c

2 Mar. Allotment 400,000

Share Capital 400,000
Being allotment monies due (20,000 X $20)

31 Mar. Cash at Bank 400,000

Allotment 400,000
Being receipt of allotment monies

1 Nov Call 200,000

Share Capital 200,000
Being call monies due(20,000 X $10)

30 Nov Cash at Bank 200,000

Call 200,000
Being receipt of call monies(20,000 X $10)

(b)
Application Allotment
$ $ $ $
2/3 400,000 1/3 400,000 2/3 400,000 31/3 400,000

400,000 400,000 400,000 400,000

Share Capital Call

$ $ $ $
2/3 400,000 1/11 200,000 30/11 200,000
Bal. 2/3 400,000
 C/b 1,000,000 1/11 200,000
1,000,000 1,000,000 200,000 200,000
1/12 Bal 1,000,000

(c) MARGE ARENA LTD

Share capital.................................................................. $1,000,000

Question 2: (PSA 10.4)

Jake Ltd
(a)
DATE $ $
Feb 1 Retained Earnings 40 000
Dividends Payable 40 000
Being dividend declared (50,000 X $0.80)

Mar 1 Dividends Payable 40 000

Cash at Bank 40 000
Being dividend payment

July 1 Retained Earnings 75 000

Share Dividends Payable 75 000
Being share dividend declared (50,000 x 5% x$30)

July 31 Share Dividends Payable 75 000

Share Capital 75 000

Dec 1 Retained Earnings 21 000

Dividends Payable 21 000
Being final dividend declared (52 500 x $0.40)

(b)
Share Capital Retained Earnings
$ $ $ $
1/1 Bal. 1,000,000 1/2 40,000 1/1 Bal. 600,000
C/B 1,075,000 31/7 75,000 1/7 75,000
1,075,000 1,075,000 1/12 21,000
31/12 bal 1,075,000 31/12 bal 464,000 .
600,000 600,000
31/12 bal 464,000

Dividends Payable Share Dividends Payable

$ $ $ $
1/3 40,000 1/2 40,000 31/7 75,000 1/7 75,000
C/B. 21,000 1/12 21,000 75,000 75,000
61,000 61,000
31/12 bal 21,000
(c) Equity section of the statement of financial position

Jake Ltd
Statement of financial position
at 31 December 2016
EQUITY $
Share capital 1,075,000
General Reserve 200,000
Retained earnings 464,000
TOTAL EQUITY $ 1,739,000

Question 3: (E10.3)

(a)
Sanders Ltd
After After
Before Share Cash
Action Dividend Dividend
Equity
Contributed equity $ 600,000 630,000 600,000
Retained earnings $ 200,000 170,000 170,000
Total equity $800,000 $800,000
$770,000

Issued shares (Number) 60,000 63,000 60,000

Share dividend: 60 000 shares x 5% x $10 per share

Cash dividend: 60 000 shares x $0.50

(b)

From the analysis above the retained earnings is the same with either method chosen, but the share
dividend does not use cash reserves the year you pay the dividend, so these funds can be reinvested
into the business. However, if the shareholders expect the same dividend per share in the future as the
current dividend then the company will need increased profits and funds to be able to meet the future
dividends as now the shareholders have 3,000 more shares.

Question 4: (PSA 10.8)

(a)
Silk Ltd
General Journal
 Date Account name (narration) Debit $ Credit $
2016

Dec 31 Retained Earnings 31,000

Dividend Payable 31,000

(Being declaration of final dividend)

(b) Dividend payout ratio = $31,000/$60,000 = 51.7%

(c) Return on shareholders’ equity = $60,000/[($5,254,000 + $5,225,000)/2] = 1.1%

(d)
Silk Ltd
Statement of Changes in Equity
For the Year ending 31 December 2016
Share General Retained Total
Capital Reserve earnings
$’000 $’000 $’000 $’000
Balance 1 January 2016* 5,000 192 33 5,225
Profit 60 60
Cash Dividends (31) (31)
Transfer to reserve 20 (20)
Balance 31 December 2016 $5,000 $212 $42 $5,254

*Opening balances for equity need to be derived as below:

 Share capital has not changed.
 Reserves increased by $20,000 so opening balance is $192,000.
 Retained earnings = $5,225,000-5,000,000-192,000=33,000.

Question 5 (Past exam question)

Clegg Ltd
 Statement of Changes in Equity
For the Year ending 30 June 2017

Share Revaluation Currency Retained Total

Capital Reserve Translation Earnings
$ $ Reserve $ $
$
Balance 8,000,000 75,000 (22,000) 210,000 8,263,000
1 July 2016
NPAT 260,000 260,000

Other (30,000) (30,000)

Comprehensiv
e Income
Cash (60,000) (60,000)
Dividends (80,000) (80,000)
Share 200,000 (200,000)
Dividends
Reserves (30,000) 30,000

Balance 8,200,000 45,000 (52,000) 160,000 8,353,000

30 June 2017