BACHELOR OF ACCOUNTING

ACC601 – INTERMEDIATE FINANCIAL ACCOUNTING 1

TUTORIAL QUESTIONS.

Question 1
Laminton Ltd’s equity as at 1 January 2017 consists of the following items:
Ordinary share capital (500,000 shares at $1.00 each) $500,000
8% Preference share capital (300,000 shares at $1.00 each $300,000
Retained earnings $200,000

On this day, the company redeems preference shares at issue price and a new issue at
$300,000 ordinary shares at $1.00 being made for the purpose.

Required
a. Prepare journal entries to record the above transactions.
b. Show equity components immediately after redemption.

Question 2
A company has on issue 600,000 redeemable preference shares fully paid at issue price of
$2.00. The directors decided to redeem these shares at a premium of 5 cents per share out of
proceeds from a fresh issue of 1,200,000 ordinary share at $1.00 each.

Required.
Prepare general journal entries.
Question 3
On 1 January 2017 a company had the following balances.
Ordinary share capital (200,000 shares at $1.20) $240,000
6% Preference shares (100,000 shares at $1.00 each) $100,000
Retained profits $210,000

The following transactions occurred during the year ended 31 December 2017.

1.7.2017 Paid half year dividends to preference shareholders. The company policy
is to pay dividends to preference shares half yearly.
Redeemed 50,000 preference shares at issue price.

31.12.2017 Issued 50,000 ordinary shares at $1.20 per share.

Paid half year dividends to preference shareholders.
Redeemed the remaining 50,000 preference shares at issue price.

Required
Journalise the above transactions.

Question 4
Universal Ltd has provided the following information in respect of shareholders’ equity.
$1.10 ordinary shares 600,000 as at 1.12.2017 $660,000
Retained earnings as at 31.12.2017 $245,000

On 15 July the company paid an interim dividend of 15 cent per share.

On 31 December the directors proposed and paid a final dividend of 17 cent per share. The
constitution allows directors to declare and pay final dividends.

Required

Prepare journal entries to record above transactions for the year ended 31 December 2017.
Question 5

Kundu Ltd has the following balances as at1.12.2017.

Ordinary share capital (1,000,000 shares issued at $1.10 each) 1,100,000

6% Preference share capital (900,000 shares issued at $1.00 each) 900,000

Retained earnings 820,000

Dividends payable for 2016 242,000

During the year, the following events occurred.

March 20 Paid dividends for the year 2016

July 5 Declared an interim dividend of 18 cents per share,

December 31 Paid preference share dividend.

Declared final dividend of 16 cents per share

Current year profit of $498,000 was transferred to retained profits account.

The directors have the authority to declare and pay dividends as per constitution.
Required
a. Prepare journal entries to record the above transactions.
b. Prepare s statement of changes in equity for the year ended 31 December 2017.
Question 6

Thre trial balance of Hamamas Ltd as at 31 December 2017 is given below.

$ $
Dr Cr
Share Capital 2,500,000
10% Debenture 500,000
General reserve 150,000
Retained earnings (1.1.2017) 185,200
Land at cost 525,000
Building (cost) 968,750
Accumulated depreciation on building 96,900
Office equipment (cost) 295,000
Accumulated depreciation on Office equipment, 110,250
Office Furniture 56,000
Accumulated depreciation on Office Furniture 21,000
Delivery truck at cost 218,750
Accumulated depreciation - Delivery Truck 109,250
Investment 808,750
Inventory 3,429,650
Accounts receivable 1,525,000
Provision for doubtful debt 36,000
Prepayments 45,800
Cash at bank 91,250
Deposits held at call 125,000
Accounts payable 1,111,000
Treasury bills with maturity in 60 days 120,000
Bank loan payable in 5 years 1,000,000
Purchases 14,258,400
Sales revenue 19,445,050
Dividend revenue 45,700
Discount revenue 40,900
Sales staff salaries 470,000
Administration staff salaries 301,600
Advertising expenses 45,200
Delivery expenses 231,900
sundry sales and distribution expenses 97,300
Electricity and power expense 176,050
Audit fees 3,500
Directors salaries and allowances 57,900
General administration expenses 427,900
Discount expenses 86,250
Employer's superannuation contributions - Sales staff 22,000
Employer's superannuation contributions - Admin staff 18,000
Provision for long-servce leave 263,000
Income tax expenses 221,700
Interest on bank loan 90,000
Interim dividend paid 150,000
Maintenance of delivery truck 448,560
Maintenance of office equipment 299,040
25,614,250 25,614,250

Additional information
a. Inventory at 31 December 2017 was valued at $3,148,650 using weighted average method.
b. The share capital consist of the following.
1,500,000 Ordinary shares at $1.00 each.
1,000,000 6% Preference shares at $1.00 each.
c. Annual depreciation is to be provided at cost at the following rates: 4% on buildings, 15%
on office equipment and office furniture, 20% on delivery truck.
d. The bank loan is secured by mortgage over land and building.
e. Provision for doubtful debts is to be made equal to 3% of debtors.
f. The company applies International Financial Reporting Standards (IFRS) and Generally
Accepted Accounting Principles in the preparation of financial statements.
g. Investments consist of the following items.
18% shares of Star Ltd (an Associate company) $325,000.
Government bonds $483,750.
h. Directors have proposed the dividends before end of balance date,
Ordinary shares 12%
Preference shares 6%
i. The directors have decided to transfer $275,000 to general reserve.

Required:
1. Prepare a statement of comprehensive income for the year ended 31 Dec 2017.
2. Prepare a statement of changes in equity for the year ended 31 Dec 2017
3. Prepare a statement of financial position as at 31 Dec 2017
4. Prepare notes and other disclosures.