Question

The equity of White Horse Ltd at 1 January 2020 was as follows. 600 000 200 000 Share capital 600 000 shares fully paid 400 000 shares issued for $1 and paid to 50c General reserve Plant maintenance reserve Retained earnings Total equity 800 000 200 000 50 000 80 000 1 130 000 The following events occurred during the year. June 25 Interim dividend of 10c per share paid, with partly paid shares receiving a proportionate July 10 Call of 50c per share on the partly paid shares July 31 Collection of call money September Bonus share issue of one share for each 10 shares held, at 15 $1 per share, allocated from general reserve December 31 Directors announce that a dividend of 20c per share will be paid in September, subject to approval at the February annual general meeting, December 31 Transfer of plant maintenance reserve to general reserve. December 31 | The company earned a profit of $60 000 Required: Prepare the journal entries to give effect to the above events. 10 marks

Answer 1

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Date	Description	Debit Amount ($)	Credit Amount ($)	Explanation
June 25	Interim Dividend A/c               Dr              To Bank A/c	80000	80000	To Record Interim Dividend Payment Amount : 1. For 600000 full paid upshares@10c =600000*10c/100 =60000$ 2.For 400000 Partly paid up shares@ 10c proportionate = 400000*10c*50% = 20000$
July 10	Share call money A/c            Dr               To share capital A/c	200000	200000	To record call money receivable
July 31	Bank A/c            Dr            To Share call money A/c	200000	200000	To record Call Money received
Sep 15	General Reserve A/c    Dr              To Share CapitalA/c	100000	100000	To Record Bonus Issue Amount : No. of Existing Shares = 1000000 Bonus Ratio = 1:10 No. of Bonus Shares = 1000000*1/10                                       = 100000Shares @ 1$                                        = $100000
Dec 31	Plant Maintenance Reserve A/c Dr To General Reserve A/c	80000	80000	To record transfer to General Reserve
Dec 31	No entry is Required when dividend is announced and record entry when dividend is approved and declared
Dec 31	If profit is earned no entry is required, but for transfer to retained earnings entry should be passed Net Profit A/c    Dr                  60000        To Retained Earnings      60000