ABFA1023 FUNDAMENTALS OF ACCOUNTING 1 SKH2008 Revised Sep.

2012

Tutorial 10: Accounting for issue of shares,

Section 1: Multiple choice questions
1. Revenue Reserves are
A accumulated and undistributed profits of a company
B amounts which cannot be distributed as dividends
C amounts set aside out of profits to replace revenue items
D amounts set aside out of profits for a specific purpose
2. A company has 1,000,000 ordinary shares at a par value of RM1 each and
100,000 5% preference shares at a par value of RM1.50 each. The directors
decided to declare a dividend of 3 sen per ordinary share.
5. The record of how the profit or loss of a company has been allocated to
distributions and reserves is found in the
A capital account
B profit and loss account
C reserves account
D working notes on the appropriation of profits
6. Revenue reserves would decrease if a company
A sets aside profits to pay future dividends
B transfers amounts into ‘general reserves’
C issue shares at a premium
D pays dividends

The total amount (ignoring tax) to be paid out in dividends amounts to 7. A company has paid monthly tax instalments of RM5,000 each from
February 2011 until December 2011. After the end of the financial year
A RM33,000 ended 31 December 2011, it was computed that the total tax liability was
B RM35,000 RM48,000.
C RM37,500
D RM30,150 A The company will be refunded RM7,000 for over-paid tax
B The company will have to pay additional tax of RM7,000
3. A company wishes to pay out all available profits as dividends. Net profit is C The company does not have to do anything
RM26,600. There are 20,000 8% Preference shares of RM1 each and D The company will be fined for paying the wrong tax amount
50,000 ordinary shares of RM1 each. RM5,000 is to be transferred to
General Reserve. What ordinary dividends are to be paid, in percentage 8. The board of directors recommended paying a 5% final dividend to
terms (ignoring tax)? ordinary shareholders. The authorised share capital of the company
A 20% B 40% comprises 5,000,000 ordinary shares of RM0.50 each. 700,000 ordinary
C 10% D 60% shares have been issued and fully paid. How much should the Accountant
allocate from the bank account for payment of the final dividends? The
4. Revenue reserves would increase if a company: applicable tax rate is 25%.

A issues shares at a premium A RM26,250

B makes a transfer from retained profit reserve to general reserves B RM35,000
C retains profits C RM13,125
D increases its current bank balances D RM17,500
ABFA1023 FUNDAMENTALS OF ACCOUNTING 2 SKH2008 Revised Sep. 2012

Section 2:

Question 1 Question 3

Emcee Berhad has an authorised share capital of 10,000,000 ordinary shares of
RM1 each. Up until now, it has already issued 6,000,000 ordinary shares. It has
recently been approved to issue an additional 2,000,000 new ordinary shares to
the public, at an offer price of RM2.30 per share. Application for a total of
5,000,000 shares was received.
(a) Show the necessary journal entries upon completion of the above
transaction.
(b) Prepare the extract of Statement of Financial Position, showing the equity
position of Emcee Berhad after completion of the above transaction.
Victory Berhad paid monthly tax instalments of RM12,000 from February 2011
to December 2011, at the beginning of every month.
In June 2011, Victory Berhad finalised its tax computation for the previous year
(financial year ended 31 December 2010) and there was under-paid tax of
RM35,000. This amount was paid immediately by the end of June 2011.
For the year ended 31 December 2011, the auditors of Victory Berhad agreed
that the estimate of tax liability is RM128,000.
(a) Using a ledger account for tax, enter all the above transactions and close
the account.

Question 2 (b) Prepare the following extracts:

- Statement of Comprehensive Income for the year ended 31 Dec 2011
Macy Berhad has issued share capital of 5,000,000 ordinary shares of RM0.50 - Statement of Financial Position as at 31 Dec 2011
each and 200,000 6% preference shares of RM2 each, in addition to borrowings
in the form of 5% debentures totalling RM1,000,000.

The board of directors are now recommending a 5% final dividend to be paid to

ordinary shareholders and to pay dividends to preference shareholders. No
interim dividends have been paid. Applicable tax rate is 25%.

Interest on debentures paid during the year was RM25,000. The remaining
interest on debentures is still outstanding at year-end.

(a) Show the necessary journal entries of the above dividend and debenture
interest transactions. (show all workings)

(b) Prepare the extract of Statement of Financial Position to show the above
position at year-end.