Reference no: EM132431238

The following is the statement of financial position of Hero as at 1 January, 2018:

Hero

Partial Statement of Financial Position as at 1 January 2018

Shareholders' Equity:

Ordinary shares capital, no par value Issued: 60,000 shares 600,000

Retained Earnings 222,000

822,000

Liabilities

4.5% Bank Loan 178,000

TOTAL 1,000,000

The company completed the following transactions during 2018.

i) Issued 20,000 5% preference shares at RM 14 per share.

ii) Offered rights issue to existing shareholders, with the right to purchase one share for every 10 shares held. Market price on the date was RM 15 per share. All offers were taken up by the shareholders.

iii) Issued 6% five-year bond with par value of RM 125,000. The bonds were issued at RM 108,000. The market interest rate on the issue date is 8%. Interest on the bond is paid annually on 31 December.

iv) The company sold household electronics for RM 1,700 each. The price includes a 1- year warranty. During the year, the company sold 960 electronic units. The estimated warranty costs is RM 85 per unit. The estimated warranty expense has not been recorded.

v) The company paid the bank loan with the final interest of 4.5% before year end.

vi) Record the first bond interest payment on 31 December 2018.

vii) The actual warranty costs paid by the company during 2018 were RM 65,000.

viii) At the end of 2018, the Board of Directors declared a final ordinary dividend of RM 65,000. The dividend will be distributed to shareholders in February 2019, subject to approval in the forthcoming annual general meeting to be held in January 2019.

ix) Declared a cash dividend on the 20,000 preference shares and the dividends were paid before year end.

Required:

(a) Journalise the above transactions. Narrations are not required. Where no entries are required, state your reason.

(b) Prepare the statement of financial position (liabilities and equity sections only) of Hero as at 31 December, 2018.