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- This topic has 1 reply, 2 voices, and was last updated 12 years ago by richieinspain.
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- November 8, 2011 at 5:02 pm #50386
2 The following trial balance relates to Cavern as at 30 September 2010:
$’000 $’000
Equity shares of 20 cents each (note (i)) 50,000
8% loan note (note (ii)) 30,600
Retained earnings – 30 September 2009 12,100
Other equity reserve 3,000
Revaluation reserve 7,000
Share premium 11,000
Land and buildings at valuation – 30 September 2009:
Land ($7 million) and building ($36 million) (note (iii)) 43,000
Plant and equipment at cost (note (iii)) 67,400
Accumulated depreciation plant and equipment – 30 September 2009 13,400
Available-for-sale investments (note (iv)) 15,800
Inventory at 30 September 2010 19,800
Trade receivables 29,000
Bank 4,600
Deferred tax (note (v)) 4,000
Trade payables 21,700
Revenue 182,500
Cost of sales 128,500
Administrative expenses (note (i)) 25,000
Distribution costs 8,500
Loan note interest paid 2,400
Bank interest 300
Investment income 700
Current tax (note (v)) 900
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340,600 340,600
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The following notes are relevant:
(i) Cavern has accounted for a fully subscribed rights issue of equity shares made on 1 April 2010 of one new
share for every four in issue at 42 cents each. The company paid ordinary dividends of 3 cents per share on
30 November 2009 and 5 cents per share on 31 May 2010. The dividend payments are included in administrative
expenses in the trial balance.I need help to answer this question
November 10, 2011 at 8:40 pm #89458There’s £50000 of equity shares – Each share costs 20p. Hence the total number of shares is 250,000 (after the issue)
The issue at 1 for 4 was for [250000 x (1/5)] = 50000 sharesThe rights issue: 42p per share. The nominal value is 20p. Share capital is 0.2 x 50000 and share premium = (0.42-0.2) x 50000 = 11000 (shown in the TB)
The dividends paid at 3p per share should be for 200000 shares
The dividends paid at 5p per share should be for 250000 shares (i.e. as there are more in issue)I’m not 100% sure but I don’;t think dividends are pro rated into months. Anyway once you have calculated the above you will have the total dividend payment. Subtract this from Admin expenses as dividends do not belong here. Put it against retained earnings in the SFP or in your statement of changes in equity
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