Assessment Criteria:
Student work will generally be assessed in terms of the following criteria:
1. Preparation of correct journal entries.
2. Accumulation of journal entries into an extract of the balance sheet.
3. Demonstration of understanding of the share and debt issue process.
XYZ Limited had the following Balance Sheet as at 29 June 20x1.
XYZ Ltd
Balance Sheet as at 29 June 20x1
|
|
$
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$
|
|
Assets
Cash
Land
Machinery
Less Accumulated depreciation
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400,000
100,000
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140,000
250,000
300,000
|
|
Intangibles
Patents
Goodwill
|
50,000
20,000
|
70,000
|
|
Total assets
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760,000
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|
Equity
Share capital
400,000 ordinary shares, 60c uncalled (issue price $1)
Paid-up capital - forfeited shares
|
160,000
50,000
|
210,000
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|
Reserves
Asset revaluation reserve
Retained profits
|
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300,000
250,000
|
|
Owners' equity
|
|
760,000
|
PART A: 20x1 year
The directors do the following as at 30 June 20x1, the annual reporting date:
Revalue land to fair value of $300,000; and Use the asset revaluation reserve to increase the paid-up amount of ordinary shares by 20c (shareholder authorisation not required).
The directors wish to do the following:
- Pay a cash dividend of $100,000 from retained profits on the 400,000 existing ordinary shares;
- Apply the remainder of the asset revaluation reserve to make a bonus issue of 220,000 fully paid ordinary shares issued at $1; and
- Transfer the remaining amounts in retained profits to a general reserve.
Under the company's constitution, the issue of bonus shares must be approved by a general meeting. Approval was given on 1 August and the changes were put into effect and journalised on 15 August.
PART B: 20x2 year
The following takes place during the financial year:
- 1 July - A disclosure document invites application for 60,000 preference shares with an issue price of $1.20 payable 70c on application and 50c on allotment.
- 31 July - Applications are received for 95,000 preference shares, together with correct application monies.
- 1 August - The directors resolve to reject the last received applications for 5,000 shares, and for the remainder to allot shares on the basis of two shares for every three applied for, surplus application monies being taken to the allotment.
- 15 August - All outstanding allotment monies are received.
PART C: 20x3 year
The following takes place during the financial year:
- 1 January - A call of 20c per shares is made on ordinary shares which are not fully called.
- 31 January - All call monies are received except in respect of a parcel of 2,000 ordinary shares
- 19 February -The directors resolve to forfeit shares on which there are calls in arrears.
REQUIRED:
a) Prepare general journal entries to record the above data for XYZ Ltd for 20x1, 20x2 and 20x3 only.
b) Prepare an extract from the Balance Sheet showing owners' equity as at 3 April 20x3.