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Kaplan section 2 qn 2

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Kaplan section 2 qn 2

  • This topic has 3 replies, 2 voices, and was last updated 2 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • November 8, 2022 at 1:45 pm #670985
    emvee16
    Participant
    • Topics: 9
    • Replies: 52
    • ☆☆

    Task 2
    An extract of Willow Co’s trial balance as at 30 June 20X1 is shown below.

    Equity shares, $1: 72000 CR
    Share premium: 13000 CR
    Revaluation surplus at 1 July 20X0: 10000 CR
    Retained earnings at 1 July 20X0: 12920 CR
    Dividends paid: 3,000 DR

    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 issue….

    -The question looked something like this and the answer was: DR. Share premium $12000 CR. Share capital $12000

    I am not convinced by this answer, I think the amounts should have been $14400. Please help clarify what the correct answer should be.

    November 8, 2022 at 4:02 pm #670991
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51567
    • ☆☆☆☆☆

    The answer is correct.

    The reason is that the 72,000 shares is the number as at 30 June X1. The bonus issue was made during the year and so the bonus issue is included in the total of 72,000.

    For every 5 shares at the start of the year, there was a bonus issue of 1 share, and therefore there were 6 shares at the end of the year.

    So the bonus issue was 1/6 times the number of shares at the end of the year, and is therefore 1/6 x 72,000 = 12,000 shares.

    November 8, 2022 at 6:34 pm #671069
    emvee16
    Participant
    • Topics: 9
    • Replies: 52
    • ☆☆

    Oh I understand now, thank you very much

    November 9, 2022 at 8:56 am #671113
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51567
    • ☆☆☆☆☆

    You are welcome 🙂

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Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Kaplan section 2 qn 2’ is closed to new replies.

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