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(Solved) The questions relate to: New share issue Share rights issue Forfeiture and reissue of shares Payment of dividends Each question is independent of...


QUESTION  4           DIVIDENDS                                                     


JDay Retailing Ltd is an unlisted company and has been very successful in recent years. The company now has a solid history of paying dividends to its shareholders. A number of years ago it also introduced a Dividend Reinvestment Plan (DRP) for its shareholders.  60% of the shareholders now utilise the DRP for the receipt of their dividends and the remaining shareholders receive cash. All shares are issued at $2.00/share.


The following are a series of events relating to dividends for Ordinary shareholders of the company:

15/6/20X4                 Determined the final dividend for the year of $0.08/share to be paid from profits.

30/9/20X4                 AGM approves the final dividend of $0.08/share and is paid on this date.

15/1/20X5                 Paid a special dividend of $0.05/share out of a general reserve.

15/3/20X5                 Declared and paid an interim dividend of $0.09/share out of profits.

20/6/20X5                 Determined the final dividend for the year of $0.11/share to be paid out of profits.

30/9/20X5                 AGM approves the final dividend of $0.11/share and is paid on this date.


The Register of Shareholders shows the following number of Ordinary shares issued at particular dates:

15/6/20X4                 12,500,000

30/9/20X4                 12,500,000

15/1/20X5                 14,000,000

15/3/20X5                 14,210,000

20/6/20X5                 14,593,670

30/9/20X5                 14,593,670


REQUIRED

Prepare general journal entries with narrations to record all the transactions dealing with all dividends which occurred in the 20X4/X5 financial year only.

Round numbers to the nearest dollar where applicable.

ACCOUNTING METHOD II ASSIGNMENT SHARE ISSUES
This assignment comprises four questions all dealing with share issue topics. The
questions relate to: New share issue
Share rights issue
Forfeiture and reissue of shares
Payment of dividends Each question is independent of the other questions.
Not all of these areas have been covered in the Equity topic in Accounting Method II. In
practice accountants are presented with issues which they are unfamiliar with and need to
learn to resolve them. In part, that is what you are presented with here. To assist you,
though, materials have been made available on MyUni. It also occurs that accountants are
required to respond to queries and problems in relatively short time periods. This will be
applied in this Assignment as you will have one (1) week to complete. The assignment will
be released in MyUni on Tuesday the 9th May 2017 at 9:00am and the due time/date for
submission is 11:00pm on Monday the 15th of May 2017. Late assignments will be
penalised at a rate of 20% of the achieved mark per day (or part thereof). Students are
advised to submit their assignment in advance of the due time/date to ensure that they do
not encounter any submission problems.
Your assignment needs to be submitted in pdf format – make sure you know how to do this.
You submit it in MyUni under the Assignment tab. Please start each question on a new
page.
Your assignment must be typed using suitable software (eg Microsoft Word). Much of the
assignment requires the preparation of general journal entries and general ledger T
accounts. It is always important that the presentation of any work for someone else to
read and interpret is of a professional standard. As a result ensure that your assignment is
well formatted, easy to follow and is readable (including English and grammar). While
there are no marks awarded for presentation, up to 10 marks can be deducted if the
assignment does not meet these criteria.
This Assignment must be your own work. Students are reminded of the various University
plagiarism policies and any occurrences of plagiarism will be dealt with accordingly. Group
assignments are not permitted.
This Assignment will be marked out of 65 marks and this represents 10% of the overall
assessment in the course Accounting Method II. QUESTION 1 NEW SHARE ISSUE 31 MARKS Pronting Enterprises Ltd was incorporated several decades ago. As at the 30 th June 20X1
the company had 10,560,000 Ordinary issued share fully paid to $4.00. There were no
Calls in Arrears or Calls in Advance.
On the 1st August 20X1 the company released a Prospectus seeking investment by the
public through the issue of a further 1,500,000 Ordinary shares at $4.00 each. Details of
payments are as follows: $1.00 payable on Application which closes 30 th September 20X1
$1.50 payable on Allotment
The remainder payable on Call/s at the company’s discretion. As at 30th September 20X1 the following Applications had been received: 400,000 applications who paid $4.00 per share
500,000 applications who paid the application and the allotment amounts
900,000 applications who paid the application amount only. On 1st October 20X1 the following decisions were made: Applicants who paid for the shares in full were allotted all of the shares they applied for
Applicants who paid the application and allotment monies received 4 shares for every 5 applied for. Excess monies were retained for future calls.
Of the 900,000 applications who paid the Application amount only, 100,000 had
their applications rejected and their money returned. The remaining applicants
were issued 7 shares for every 8 applied for and excess money was allocated to
the allotment. All shares were allotted as detailed above on 1st October 20X1 and allotment monies were
required to be paid on 31st October 20X1.
All outstanding allotment monies were received as required.
On the 1st January 20X2 Pronting Enterprises Ltd made a call of $1.00 per share payable on
the 28th February 20X2. Previous amounts held were allocated in satisfaction of the call.
As at 28th February 20X2 all call monies were received except for 150,000 shares. REQUIRED
i. Prepare general journal entries with narrations for Pronting Enterprises Ltd to
record all transactions from the events described. ii. Record the general journal entries from i) above in general ledger T accounts and
balance the accounts as at 28th Februarys 20X2. Assume that the Cash at Bank
account was a dedicated account for the share issue and, therefore, had no
opening balance or had any other transactions other than those that arose out of
the share issue transaction above. QUESTION 2 SHARE RIGHTS ISSUE 6 MARKS Pyke Franchises Ltd equity section of its Balance Sheet as at 30th June 20X5 presents as
follows:
EQUITY $ 000s Share Capital
Ordinary shares paid to $5.00 48,000 8% $10.00 Preference shares 12,000 Reserves
Foreign exchange translation 2,564 Asset revaluation surplus 4,560 Retained Profits
TOTAL EQUITY 6,732
73,856 The Preference shares are non-participating. Share issue costs of $2,000,000 have been
offset against the Ordinary share capital.
The company wishes to raise further capital and decides to offer existing Ordinary
shareholders with the opportunity to invest further in the company. As a result a
renounceable Rights issue is made to those shareholders of 1 share for every 10 held at an
exercise price of $5.00/share payable in full at the exercise date of 31 st October 20X5.
There are no costs associated with this Rights issue.
As at 31st October 20X5 the required money had been received from 85% of shareholders.
The remaining shareholders decided not to take up the offer. REQUIRED
Prepare general journal entry/s with narrations to record the transactions resulting from the
Rights issue. Show any calculations you consider relevant. QUESTION 3 FORFEITURE AND REISSUE OF SHARES 12 MARKS
Scottie Golf Ltd is an unlisted company and has been operating for a number of years. At
the beginning of the 20X8/X9 financial year it decided to raise further capital from the
public. As a result it issued a prospectus for 2,000,000 shares at $5.00/share. The offer
was oversubscribed and all 2,000,000 shares were issued. A First Call was made on the
shares on 1st January 20X9. The general ledger T accounts below provide the details of the
issue and the call.
Share Capital
1/7/X8 Bal b/d 8,700,000 1/10/X8 Applications 4,000,000 Allotment
1/1/X9 First Call 2,000,000
2,000,000 Calls in Advance
1/1/X9 First Call 500,000 1/10/X8 Applications 1,000,000 First Call
1/1/X9 Share Capital 2,000,000 1/1/X9 Calls in Advance
28/2/X9 Cash at Bank 500,000
1,461,830 On 1st March 20X9 the decision was made to forfeit the shares of those shareholders who
did not pay the Call. Those shares were offered to another single shareholder at price of
$3.80/share but paid to $4.00/share with that shareholder having to pay any future calls.
The single shareholder paid the amount due on 15 th March 20X9 and the costs associated
with the forfeiture and re-issue were $5,700. The forfeited shareholders received refunds
of the remaining amounts on 31st March 20X9. REQUIRED
Prepare general journal entries with narrations to record all the transactions dealing with
the share forfeiture, subsequent share reissue and payment to forfeited shareholders. QUESTION 4 DIVIDENDS 16 MARKS JDay Retailing Ltd is an unlisted company and has been very successful in recent years.
The company now has a solid history of paying dividends to its shareholders. A number of
years ago it also introduced a Dividend Reinvestment Plan (DRP) for its shareholders. 60%
of the shareholders now utilise the DRP for the receipt of their dividends and the remaining
shareholders receive cash. All shares are issued at $2.00/share.
The following are a series of events relating to dividends for Ordinary shareholders of the
company:
15/6/20X4 Determined the final dividend for the year of $0.08/share to be
paid from profits. 30/9/20X4 AGM approves the final dividend of $0.08/share and is paid on this
date. 15/1/20X5 Paid a special dividend of $0.05/share out of a general reserve. 15/3/20X5 Declared and paid an interim dividend of $0.09/share out of
profits. 20/6/20X5 Determined the final dividend for the year of $0.10/share to be
paid out of profits. 30/9/20X5 AGM approves the final dividend of $0.11/share and is paid on this
date. The Register of Shareholders shows the following number of Ordinary shares issued at
particular dates:
15/6/20X4 12,500,000 30/9/20X4 12,500,000 15/1/20X5 14,000,000 15/3/20X5 14,210,000 20/6/20X5 14,593,670 30/9/20X5 14,593,670 REQUIRED
Prepare general journal entries with narrations to record all the transactions dealing with all
dividends which occurred in the 20X4/X5 financial year only.
Round numbers to the nearest dollar where applicable.

 


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