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Dear John,
The following is a question I found on a Revision Kit;
I received at an answer of $14,400 but the Marking Scheme say’s it’s $12,000An extract of Willow Co’s trial balance as at 30 June 20X1 is shown
below.
Debit Credit
$000 $000
Equity shares 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 000During the year ended 30 June 20X1, Willow Co made a ‘1 for 5’ bonus issue.
Identify the accounting entries required to
record the bonus issue. (4 marks)Thank you! ?
The answer in the book is correct.
72,000 is the number of shares at the end of the year and so includes the bonus issue that was made during the year.
For every 5 shares before the issue, they issued 1 bonus share and therefore there are 6 shares at the end of the year. Therefore the bonus issue was 1/6 x 72,000 = 12,000.
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