I was looking at the answers for Noreen Co and don’t understand why the Issue costs of 200,000 are added to retained earnings when arriving at the final retained earnings figure? Please help.
This is because they have incorrectly charged the issue costs to profit or loss, so will have DR SPL CR Bank.
They should have DR Financial asset/liability CR Bank and so to correct this we need to CR SPL (adding back the incorrect initial entry) DR Financial asset/liability.