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Hi Mike,
Related with this practice question shouldnt the net profit for the year have +50 instead of -50 (per answer 566-50)? And as well why on the share premium column there is a deduction of 40 (as per question a bonus issue of $200k $1 equity bonus shares capitalizing its share premium account) then shouldn’t the deduction be for 200? Thanks for the clarification.
$200 is taken out of share premium but there is an issue of 400,000 shares at a premium of 40 cents per share which gives a credit to share premium of $160. Netting the two off against each other gives a reduction of $40 in the share premium column
The $40 that was previously accumulated in the Revaluation Reserve, because of the change in accounting policy, has been retrospectively taken out of Revaluation Reserve and credited to Retained earnings.
The fall in value this year of $50 represents a loss this year and has been set against the previously reported profit figure of $566
OK?
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