Question

2.3 (6) Fed Ltd has the following authorised share capital: Authorised: 900 000 Ordinary shares 500 000 12% Preference shares. The issued share capital at 31 December 2019 is as follows: 400 000 Ordinary shares at R1,00 each, and 200 000 12% Preference shares at R2,00 each of the issued share capital, the following shares were issued on 30 June 2019 and have been correctly recorded 100 000 Ordinary shares at R1,00 each, and 50 000 12% Preference shares of R2,00 each On 30 November 2019 directors declared an ordinary dividend of 50 cents per share payable to all shareholders registered on 31 December 2019.

Answer 1

Journal entries are as follows:

Credit Date 30 Nov, 2019 Debit $248,000 Account Title and Explanation Retained Earnings A/C Proposed dividend-preference shares A/C(200,000*12%*R2) Proposed dividend-ordinary shares A/C(400,000*0.50) (To record the declaration of dividends on preference shares and ordinary shares) $48,000 $200,000 31 Dec, 2019 $48,000 $200,000 Proposed dividend-preference shares A/C Proposed dividend-ordinary shares A/C Cash A/C |(To record the payment of dividend on preference shares and ordinary shares) $248,000