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Prepare the relevant journal entries for the bonus

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Question - XYZ Limited was incorporated on January 4, 1985. The entity's reporting date is December 3 1 st of each year. On the date of incorporation, the entity issued 100,000,000 ordinary shares with a par value of $0.50 each. Since the date of incorporation the entity's share capital remains the same. However, on December 30, 2019 the entity made a 1 for 2 bonus issue after which it immediately made a 2 for 5 rights issue for $1.20 each. After the rights issue the entity declared dividends of $0.10 per share on December 31, 2019. Immediately before the issue the entity had the following balances:

Property, plant and equipment $250,000,000

Inventory $150,000,000

Trade receivables $80,000,000

Bank balance $20,000,000

Long term loans $375,000,000

Retained earnings $65,000,000

Share premium $10,000,000

Required -

a. Draft the statement of financial position before the bonus and rights issue.

b. Prepare the relevant journal entries for the bonus and rights issue.

c. Prepare the relevant journal entry for the declaration of dividends.

d. Re-draft the statement of financial position as at December 31, 2019.

Reference no: EM133145897

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