Reference no: EM132215359

Question - Information on Death Star Ltd's share capital for the financial year ended 30 June 2017 is presented below:

Ordinary shares book value @ $2.00 per share - $24,000,000

Preference Shares book value @ $2.25 per share - $13,500,000

Total share capital - $37,500,000

The following events occurred during the financial year:

An obligatory 6% preference share dividend was announced on 1/9/2017. The preference dividend was paid on 16/9/2017.

On 20/10/2017 three of the company's key directors were provided with a total of 500,000 share options valued at $0.60 each as part of their compensation package. The options contracts allowed the three directors to acquire one ordinary share per granted option in the company for $10.50 each. These options could be exercised up until the 30 June 2018, after which they would lapse.

On 10/11/2017 the directors declared an issue of 300,000 bonus ordinary shares to existing ordinary shareholders at book value (i.e. $2.00)

After the company's ordinary share price increased to $12.50 per share on 3/2/2018 the three directors decided to exercise their option contracts to purchase additional shares in Death Star on that date.

On 30/5/2018 the directors of Death Star declared a final ordinary dividend of 6 cents per share. The dividend was paid 2/7/2018.

After announcing a profit of $2,680,000 for the financial year on 30 June 2018, the directors decided that 20% of the remaining profit (after considering all dividends declared throughout the year) was to be transferred into a General Reserve.

Required: Prepare the journal entries up to 30 June 2018 to record:

1) The preference dividend transactions;

2) The granting of the share options;

3) The bonus share issue;

4) The exercise of the share options;

5) The final ordinary dividend declared; and

6) The closing entry for the dividend transactions.

7) The transfer of profit to the General Reserve.