ACCT1511 Study Guide - Quiz Guide: Issued Shares, Pac-Man, Share Capital
1
Tutorial Questions
Year
Transaction
Journal entries (if any)
Y1
Camelot Ltd’s has an opening balance in
share capital of $2,375,000 (consisting of
shares issued at $2 each). Camelot Ltd
needs to raise funds quickly to build a
round shopping complex near Merlin
Central. PacMan Bank accepts the offer.
On 1 July 2010 Camelot Ltd raised
$1.9m for 1m shares (each share is worth
$1.90) through a private placement with
PacMan Bank.
1 July 2010:
Dr Cash $1.9 m
Cr Share Capital $1.9m
Yr 2
Camelot Ltd is now established itself
more in the market. The directors resolve
to make a share issue to the general
public. The offer is for 10m shares at $4
each payable entirely on application. On
On 1 July 2011, Camelot Ltd received the
application money for 10 million shares.
The shares were allocated on 15 July
2011.
1 July 2011:
DR Cash trust $40m
CR Application $40m
15 July 2011:
DR Application $40m
CR Share Capital $40m
DR Cash $40m
CR Cash trust $40m
Yr 3
On 1 July 2012, the directors declared a
bonus issue out of Revaluation Reserve
of $1.7m (the issued shares worth $1.70
each). The bonus issue was recorded on
the 3 August 2012.
1 July 2012
Dr Revaluation Reserve $1.7m
Cr Bonus issue payable $1.7m
3 August 2012
Dr Bonus issue payable $1.7m
Cr Share Capital $1.7m
Yr 3
Directors of Camelot Ltd decides to
declare and pay interim cash dividend
during the 2012 financial year. Camelot
Ltd declared the interim cash dividend on
1 November 2012 to be $0.06 per share.
All shares issued in the prior years are
eligible for the same interim dividend.
The interim dividends were paid on 15
November 2012.
1 November 2012
Dr Retained earnings 791,250
Cr Interim dividend payable 791,250
($0.06 x 13.1875m shares = 791,250)
15 November 2012
Dr Interim dividend payable 791,250
Cr Cash 791,250
calculation of no. of shares issued at this
point: 1,187,500 opening shares +
1,000,000 shares on 1 July 2010 +
10,000,000 shares on 15 July 2011 +
1,000,000 shares on 3 August 2012 =
13,187,500 shares)
Yr 4
On the last day of the financial year, the
directors of Camelot recommend a final
dividend of $0.12 for the year-ending 30
June 2012. All shares issued in the prior
years are eligible for the same final
dividend. The final dividend was
approved by shareholders at the annual
general meeting on 28 September 2012
and was paid on 5 October 2012.
28 September 2012
Dr Retained earnings 1,582,500
Cr Final Dividend Payable 1,582,500
5 October 2012
Dr Final Dividend Payable 1,582,500
Cr Cash 1,582,500
2
Year
Transaction
Journal entries
Yr 4
The directors of Camelot Ltd believe that
it is difficult for institutional investors to
obtain enough shares for a matched
portfolio. The share price per share has
also risen to $100 per share and they are
concerned that this will deter investors
from purchasing their shares compared to
other industry shares. On 1 April 2013,
the directors resolve to do a 10 for 1
share split. The balance of share capital is
$45,975,000
No journal entries
Yr 5
On 5 July 2013, Camelot’s management
resolve to increase General Reserve with
a transfer from Retained Earnings of
$900,000.
Dr Retained Earnings 900,000
Cr General Reserve 900,000
Yr 6
Camelot directors think that the market is
undervaluing their shares. In order to
signal to the market that the directors
think that the outlook of the company is
much better then what is reflected in
current share prices, they resolve to use
the company cash reserves for a share-
buy back of 5 million shares at the
current market price of $1.5 for each
share. The buy back takes place
successfully on 1 March 2014. By
coincidence, the issue price is equal to
market price which the company paid to
repurchase these shares.
Dr Share Capital $7.5 m
Cr Cash $7.5 m
3
Q2: Cash Dividends, Bonus Issue and Share Split
Indicate whether the following actions lead to an increase, decreases or have no effect
on Company’s asset, liabilities or equity.
Assets
Liabilities
Equity
A cash dividend of $0.5 per share is
declared and paid out of retained profits.
The company’s share capital is $500,000
and the company has 100,000 fully paid
up shares.
Decrease
No Change
Decrease
The company declares and pay a 1:5 bonus
issue out of the company’s revaluation
surplus. The company’s share capital is
$500,000 and the value of the revaluation
surplus is $200,000. The company has
100,000 fully paid up shares.
No Change
No Change
No change in
total equity
but
revaluation
surplus will
decrease and
share capital
will increase.
The company declares and perform a 3:1
share split. The company has 100,000
fully paid up shares. The company’s share
capital is $500,000 and retained earnings
is only $25,000.
No Change
No Change
No Change
Q3: QUESTION 2 - Final Exam, 2013s1 (modified)
The following transactions took place during the period ending 30 June 2016 for
McKay Ltd:
Transfer $15,000 from general reserve to retained profits
Profit for the period was $780,000
Land was revalued upwards during the year by $45,000 for the year
Bonus share issue from Revaluation Reserve of $50,000
Share issue received funds of $120,000 from investors and all shares applied
for were allotted during the period.
A bank loan of $34,000 was paid off with cash.
Dividends declared and paid with cash during the period totalled $160,000.
Additional information:
Beginning balance of shareholder’s equity (1 July 2015) was $165,000.
Assume there were no other transactions during the period than those
mentioned above.
Document Summary
Camelot ltd"s has an opening balance in share capital of ,375,000 (consisting of shares issued at each). Camelot ltd needs to raise funds quickly to build a round shopping complex near merlin. . 9m for 1m shares (each share is worth. Camelot ltd is now established itself more in the market. The directors resolve to make a share issue to the general public. The offer is for 10m shares at each payable entirely on application. On 1 july 2011, camelot ltd received the application money for 10 million shares. On 1 july 2012, the directors declared a bonus issue out of revaluation reserve of . 7m (the issued shares worth . 70 each). The bonus issue was recorded on the 3 august 2012. Directors of camelot ltd decides to declare and pay interim cash dividend during the 2012 financial year. 1 november 2012 to be sh. 06 per share.
