Question

1. Prepare journal entries for each of the following transactions for ABL Ltd that started operations in September 2019: In September 2019, ABC Ltd issued a prospectus offering 500 000 shares at $3.00 per share with $2 payable at the time of application, $0.50 payable on allotment and $0.50 on call. On 15 October, the directors allotted 500 000 shares to subscribers. The call was receivable on 15 November 2019 and all amounts due were collected on 30 November On 10 December 2019, the directors of ABC Ltd declared a 10% share dividend to be paid out of the balance in the Retained Earnings account on 20 December 2019. No narrations required. 2. Calculate the balance of Share capital and Retained Earnings accounts at 31 December 2019 (Profit for the year ended 31 December 2019 was $800,000) Share capital: Retained earnings:

Answer 1

33 34 Debit Credit 35 In the Books of ABL Ltd. Date Account Title 2019 15-Sep Bank (500000*2) Share Application 36 1,000,000 37 1,000,000 38 39 1,000,000 Share Application Share Capital 40 1,000,000 41 42 15-Oct Share Allotment (500000 *.50) Share Capital 250,000 43 250,000 44 Bank 250,000 45 46 47 Share Allotment 250,000 48 49 15-Nov Share Call (500000* 50) Share Capital 250,000 250,000 50 51 30-Nov Bank 250,000 52 Share call 250,000

54 55 150,000 10-Dec Retained Earnings (500000*3)*10% Share Dividend Payable 150,000 56 57 20-Dec Share Dividend Payable 150,000 58 Cash 150,000 59 60 2) Balance of Share Capital and Retained Earnings Accounts at 31st December 2019 61 62 Share Capital (1000000+250000+250000) 1,500,000 63 Retained Earnings (800000 - 150000) 650,000 64