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1. on 1 october 2002, Ben issued 60,000 $ 0.50 ordinary shares at a premium of 100%. A bonus issue of one for ten shares held was on 1 November 2002; all shares in issue qualified for the bonus
capital and reserves:………….2003……………….2002
ordinary shares $0.50 each…..363………………….300
share premium…………………….89……………………..92
revaluation reserves………………50……………………..0
retained earning……………………63…………………….(70)the answer sheet is below
cash flows from financing activities:
proceeds from issue of share capital( 60*1$)……………60Sir, i don’t know how the figure of 60 comes out. could you possibly explain to me how they get 60?
my working is stuck until there>>>
Dr cash 30,000
cr share capital 30,000i know how to do Bonus shares…. but in this case, i don’t know the way.
Mike help me:)
This is what I wrote to you yesterday – won’t that do?
““issued 60,000 $0.50 ordinary shares at a premium of 100%.”
The question tells us that 60,000 shares with a nominal value of 50 cents each were issued at a premium of 100%
So, for each 50 cent share that was issued, the entity received 50 cents + 100% of 50 cents
Therefore, for each of the 60,000 shares that were issued, the entity received $1 and 60,000 x $1 = $60,000
Your journal entry of:
Dr cash 30
Cr Share capital 30should be:
Dr Cash $60,000
Cr Share Capital $30,000 (60,000 x 50 cents)
Cr Share Premium $30,000 (60,000 x 50 cents premium)OK?”
I really appreciate your invaluable answer ;).i fully understand.
Sir….I have other question. so sorry to keep asking on weekends.
I don’t mind that you reply to my answer tomorrow.
please see below.
SOFP as at 31 May.
Current asset:…………….2007………..2006
investments…………………..95……………20SOCI
Profit from operations………………..67
Finance cost……………………………(17)
Investment income……………………..3Cash flow.
Cash flows from investing activities.
investment income received………………….3the question is that in my understanding, until Reconciliation namely Cash from operation, we don’t need to make T entries to figure out how much they actually pay for Govenrnment grant income, Finance cost and so on. However, after operational activities, we must make entries to get the payment on each entry.
so if i apply this thought to the investment entry,
b/f …….20
invest….3
C/f……..95
balance 72 on Debit side.but the answer sheet tells me just 3.
i’ve already listened to your lectures regarding Goodwill and many stuff, but most likely my knowledge is blurred.
so could you possibly tell me why they just get 3 instead of 72 balance please?
i know the fact that investments on Current asset were used to get subsidiary and so forth….
many thanks ^^
Regard
your student.Where do you think the double entry is for the investment income? Here’s a clue and it’s simply an extract from what you have typed:
“Cash flows from investing activities.
investment income received………………….3”You haven’t actually asked me a question, but you have given me the answer to the question that you haven’t asked!
“but the answer sheet tells me just 3”
So I presume that the question asked you for the entry in investing activities concerning the investment income from … the investments
And the answer is 3, as stated in the question!
IF the question was asking “How much money was spent in the process of purchasing investments?” then the answer (from the information that you have given me) would appear to be 75 (95 – 20)
But you mention also that “investments on Current asset were used to get subsidiary” but you give me no indication of how much of that increase in the investment figure relates to the increase as a result of acquiring of the subsidiary
In fact, you seem to have given me less than half the information that I need to answer a question that you haven’t asked
I’m lost!
Sir i’m sure that you recognize I am not a native speaker, so i try to get used to reading and
dealing with the question as much as possible to reduce the number of mistakes.
One of my habit is to make an entry to figure out the collect number like payment or cash received, but in this case, i’m not accustomed to it , because it just appears on SOCI.
In question, there is no information related to Subsidiary or associates. just i assumed by myself that the investment would have used to integrate Subsidiary.
the only information they give me is below
SOFP as at 31 May.
Current asset:…………….2007………..2006
investments…………………..95……………20SOCI
Profit from operations………………..67
Finance cost……………………………(17)
Investment income……………………..3and the answer is below
Cash flow.
Cash flows from investing activities.
investment income received………………….3so i’m afraid that i would do the same mistake as i might do in the real test.
sometimes, the meaning of the words are ambiguous… i can’t decide whether i must make an entry or not in order to get the collect figure.
i make entries to get interest received and dividend received, but why not to make an entry to get investment income received?
what is the difference between the way to get interest received and they way to get investment income received? ha….
help me Sir
thank you for your kind help
could you possibly advise meRegard
your studentcould you possibly advise me
The reason that we need workings to calculate dividends paid, interest paid, tax paid … is because there is often a brought forward liability and a carried forward liability
This situation gives rise to the mantra “brought forward, income statement, carried forward (and therefore) cash”
You must have seen and heard me use this mantra on the screening of the lectures
IF there had been a current asset of investment income receivable brought forward and another current asset of investment income receivable carried forward, then we would have used a working and applied the mantra “brought forward, income statement, carried forward (and therefore) cash”
Imagine that at the start of the year there had been a current asset of investment income receivable brought forward of $18 and another current asset of investment income receivable carried forward of $15 and there was a figure in the statement of profit or loss for investment income of $100, how much cash has actually been received?
Brought forward 18
Income Statement 100
Carried forward (15)Therefore cash must be 103
In the example that you have posted there is no investment income receivable, neither at the start nor the end of the year
So, applying the mantra:
Brought forward Nil
Income Statement 3
Carried forward (Nil)Therefore cash must be 3
OK?
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