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May 27, 2018 at 12:11 pm
Concerning question 4 Dividend paid is only recorded when it is paid and only in statement of changes in equity… Whatever Dividend that is yet to be paid (but proposed dividend will not be recorded as Liability) but not paid yet will go to SOFP as Current liability. That is why only 120,000 will go to SOFP as current liability Sir Am I correct?
May 27, 2018 at 12:16 pm
Kindly sir correct me i cannot understand this question …
John Moffat says
May 27, 2018 at 5:39 pm
As you should have read in the pop up answer to this question, nothing will appear in the SOFP. Dividends only appear as a current liability if they have been approved by the shareholders (i.e. voted on) before the year end but have not been paid. The dividend of 120,000 was not declared until after the year end (the year end is in June and it was declared in August) and therefore it is not relevant for this years financial statements.
March 19, 2018 at 2:00 pm
Hi, for question 4, wouldn’t the dividend paid (100,000 + 40,000) reduce the retained earnings in the SOFP? I notice this question is similar to Example 2 in the notes but the nature of the answer is very different. Can you please explain the subtle difference? Thank you.
March 19, 2018 at 4:34 pm
It will affect the retained earnings, but it is not disclosed separately in the SOFP.
August 15, 2017 at 9:32 am
The reason why 120000 wasnt included in SoFP was because it was declared in August 2006? Am i right?
August 15, 2017 at 2:53 pm
Yes, you are correct (In future please give the number of the question that you are asking about)
April 10, 2017 at 5:39 pm
thanks tutor for your great free work. in Q2 I worked out share capital 1/2*125000=62500+125000=187500+1/5*187500=37500 then 187500+37500=225000. share premium i could not work out. but i confused where 0.25 ,0.75 and 25c came from. thanks for the web site and your great help.
April 11, 2017 at 6:48 am
The question says that the shares have a nominal/value of 25c. Therefore when the new shares are issued at 1.00, 35c goes to share capital and the other 75c goes to share premium.
Have you watched the free lecture on rights issues and bonus issues?
April 12, 2017 at 3:35 pm
thanks for your respond.I watched the lecture , but in the lecture there are no 25c ,35c,75c are these cents of $1 divided? or may be i misunderstood. thank you
April 12, 2017 at 5:20 pm
I have explained in my previous answer 🙂
November 1, 2016 at 6:06 am
Hi Sir, while thanking you for this great website I would like to ask maybe you can explain to me question 2 in detail please especially I did not understood why we deduct the 37,500 from the Share premium? why is there a decrease? Thanks a lot
November 1, 2016 at 6:25 am
A bonus issue is an issue for free shares to existing shareholders. The entry is always to credit share capital (because there are more shares in issue) and debit share premium (because there has been no cash received and so the total owing to shareholders does not change).
This is explained in detail in my free lectures (the lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well).
November 1, 2016 at 5:07 pm
Thanks a lot for your help
November 1, 2016 at 5:10 pm
You are very welcome 🙂
October 5, 2017 at 3:30 pm
Hi Sir, concerning Question 2. the double entry for bonus issued is Dr. Share Premium and Cr. share capital and for rights issued it is Dr Cash, Cr share capital and Cr share premium Account. so i worked the question using the accounting entries and i got $50,000 for my share premium account because the opening balance of $100,000 is on the debit side and also the bonus issued of $ 37,500 and on the credit side it is rights issued of $ 187500. But for the answer of that question you have $250,000 because you Dr. rights issued of $187500 and Cr. bonus of $37500. so my question is why did u Dr, Rights issued and Credit Bonus when the accounting entries stated to Dr. Bonus issued and Cr. Rights issued for the share premium account???
October 5, 2017 at 4:14 pm
First, the balance on the share premium account is always a credit balance (not a debit balance). Secondly, we do not debit rights issued and credit bonus – there are not such accounts! We debit cash, with the cash received, credit share capital with the nominal value of the shares issued, and credit share premium with the excess of the cash over the nominal value. Thirdly, it is better not to think in terms of debits and credits anyway – Paper F3 is not a debit and credit exam. Computers do the debits and credits these days – accountants tell the computer what to do (and that is what the exam is mostly testing) 🙂
I really do suggest that you watch my free lectures before attempting the tests. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
September 19, 2016 at 10:17 am
In this question the March 2006 dividends were paid before the end of the year so it must have been approved. I do not understand why $40000 wont show up on the Statement of financial position. I do get that the $120000 wasn’t approved or paid before the end of the year but the interim dividend was.
Your clarification will be much appreciated.
September 19, 2016 at 11:13 am
But a dividend would only appear in the SOFP if it had been approved but had not been paid (and so was a liability). Since it has been paid, there is nothing owing.
February 14, 2018 at 11:06 pm
Dear sir, For what concerns Question no 3, Chapter 13, in the lecture notes I have found the following information that seems contrary to the correct answer indicated for this question. “These dividends are not recorded until they are actually paid. Therefore proposed dividends will not appear in the Statement of Financial Position. In addition, dividends will be subtracted from the retained earnings only in the year that they are actually paid.” Thank you very much for your help.
February 15, 2018 at 6:48 am
But question 3 does not mention proposed dividends – only dividends paid.
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