Exam preparation question 1 – Financial liability – FR – Noreen

This topic has 3 replies, 3 voices, and was last updated 1 year ago by P2-D2.

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January 3, 2023 at 1:14 am #675323
fahim231
Participant
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Hi,

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.
January 5, 2023 at 4:50 pm #675399
P2-D2
Keymaster
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Hi,

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.

Thanks
May 21, 2025 at 10:48 pm #717403
kamo7293
Participant
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Thank you. I couldnt understand as well. the answers in the back does not explain why the issue costs are added to retained earnings
May 26, 2025 at 8:47 am #717453
P2-D2
Keymaster
- Topics: 4
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The answer is given in the response to the original post, where the issue costs were originally expensed through profit or loss incorrectly and we are not adding them back to retained earnings.

Thanks
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