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Permalink Reply by hunny on January 1, 2012 at 12:49pm

Financial Accounting (MGT401)
Assignment # 2

 
 
 
 
 
1)      Journal entries to give effect to the above resolution
 
SOLUTION
 
Journal Entries
 
 
                                                                                        Rs.           
Rs.
 
(1)   Debit :Accumulated Profits                             100000
Debit: General Reserves                                  170000
Debit: Share Premium                                     150000
Credit: Bonus to shareholders Account                           420000
 
           
 
            Debit: bonus to shareholders Account             420000
            Credit: share capital                                                        
300000
            Credit: Share Premium Account                                     

120000
 
 
(2)   Debit: Shareholders Account                         360000
Credit: Share Capital                                                       300000
Credit: Share Premium Account                                      60000
 
 
           Debit: bank Account                                      360000
           Credit: Shareholders Account                                          360000
 
 
(3)   Debit: share capital                                      100000
Debit: Share Premium /Accumulated profit 20000
Credit: Cash account                                                      120000
 
 
Debit: Accumulated Profits                         100000                    
Credit: Capital Repurchase Reserve                               100000
 
 
 
1)      Revised Balance sheet (Equity portion only)
 
SOLUTION
 
Model Company Limited
Revised Balance Sheet
As on  30 June,2010
 

                                                                                                           
     Rs.
 
Authorized Capital                                                                    
 
1000000 Ordinary shares of Rs. 10
each                                               10000000                                       
                                                                             
Paid Up capital
 
125000 shares of Rs. 10 each                                                               
1250000
 
 
Reserves
 
 
 
            Accumulated
profits                                                                                30000
            General
Reserves
280000
            Share
Premium                                                                                        
180000
            Capital Repurchase
reserve                                                                      100000
                                                                  Total
Equity                                       1840000  
 
 

2)      Necessary working schedules
 
SOLUTION
 
Working Schedules:
 
Working #1
 
Number of bonus shares Issued = 75000 * (4/10)
                                                   =7500*4
                                                   = 30000 bonus shares
 
Amount of bonus shares = 30000*14
                                        = Rs. 420000
 
Amount Transfer to share Capital = number of bonus shares issued *
Nominal price/share
                                                       = 30000* Rs.10
                                                       = Rs.300000
 
Amount Transfer to share premium account = number of bonus shares
issued *
premium/share
 
                                                                       =30000*Rs.4
                                                                       = Rs.120000
 
 
Working #2
 

Number of right shares issued= 75000*(2/5)
                                                = 15000*2
                                            = 30000 right shares
 
 
Amount of right shares = number of right shares issued * issued price /
share
                                      = 30000 * 12
                                      = Rs.360000
 
 
Amount transfer to Share Capital = Number of right shares issued *
nominal price /share
                                                      =30000* Rs.10
                                                      = Rs30000
 Amount Transfer to Share Premium Account = Number of shares
issued* Premium/share
 
                                                                         = 30000*Rs.2
                                                                         = Rs.60000
 
Working #3
 
Amount of shares repurchased = number of shares repurchased*issued
price per share
                                                  = 10000* Rs.12
                                                  = Rs.120000
 
Reduction in Paid up capital = number of shares repurchased * Nominal
Value per share
                                              = 10000* Rs.10

                                              =Rs.100000
Reduction in Share Premium Account =  Number of shares repurchased*
premium per share
                                                             = 10000* Rs.2
                                                             = Rs.20000
 
 
Working # 4
 
Existing shares                     75000
Bonus Shares Issued            30000
Right shares Issued              30000
Shares Purchased                (10000)
  Total Paid Up Capital       125000
 
 
Accumulated  profits =( Existing accumulated profits – used for bonus
shares- used for the payment of premium on repurchased shares –
nominal Amount of repurchased shares transfer to Capital Repurchased
reserve)
 
                                 = Rs.250000 – Rs.100000 – Rs.20000 -  Rs.100000
                             = Rs.30000
 
 
General reserves = Existing general reserves – used for bonus shares
                           = Rs. 450000 – Rs.170000
                           = Rs.280000
 
 
Share Premium reserve=  existing share premium – used for bonus

shares + premium received on bonus shares + premium received on
right shares
                                     = Rs.150000 – Rs.150000 + Rs.120000
+Rrs.60000
                                     = Rs.180000
 
 
Capital repurchased reserve = Number of repurchased shares * Nominal
price per share
                                             = 10000 * Rs.10
                                             = Rs.100000