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An extract of Willow Co’s trial balance as at 30 June 20X1 is shown below.
Debit Credit
$000 $000
Equity shares, $1 72,000
Share premium 13,000
Revaluation surplus at 1 July 20X0 10,000
Retained earnings at 1 July 20X0 12,920
Dividends paid 3,000
During the year ended 30 June 20X1, Willow Co made a ‘1 for 5’ bonus issue.
Complete the following table to identify the accounting entries required to record the
bonus issueShouldn’t the correct entries be
14400 CR share capital
14400 DR share premium?but the answer uses 72000 * 1/6 =12000
The 72,000 shares are the shares at the end of the year. The bonus issue had been made during the year and therefore the 72,000 includes the bonus issue.
For every 5 shares at the start of the year the bonus was 1 share, and therefore there are 6 shares at the end of the year. So the bonus issue must have been 1/6 x 72,000.
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