Exercise - Share issues, options, statement of changes in equity
On 30 June 2016, the equity accounts of Crayfish Ltd consisted of:
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120 000 ordinary shares, issued at $2.50 each,
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$300 000
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fully paid Options (80 000 at 50c each)*
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40 000
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General reserve
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30 000
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Forfeited shares reserve
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2 000
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Retained earnings
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75 000
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* The options were exercisable between 1 May 2017 and 31 May 2017. Each option allowed the holder to buy one ordinary share for $3 each.
Additional information
The following transactions and events occurred during the year ended 30 June 2017:
- The final 6c per share dividend for the year ended 30 June 2016 was paid on 27 September 2016. Shareholder approval to pay the dividend had been obtained at the annual general meeting on 20 September.
- On 1 October, the directors issued a prospectus offering 40? 000 ordinary shares at an issue price of $2.80, payable $2 on application and 80c as a future call. The closing date for application was 31 October 2016. The share issue was underwritten by Support Stockbrokers for a fee of $2500, payable on 15 November 2016.
- By 31 October 2016, applications for 50? 000 shares had been received.
- On 5 November 2016, the directors allotted the shares pro rata, with applicants receiving 80% of their requested shares. The company's constitution allows excess application monies to be retained and used to offset future calls payable.
- On 15 November 2016, the underwriting fee was paid.
- On 31 December 2016, the directors announced an interim dividend of 3c per share payable in cash on 1 February.
- To raise funds for expansion, the directors sold a parcel of 80? 000 ordinary shares to Iron Jays Finance on 28 April 2017 at an issue price of $2.90 per share.
- By 31 May 2017, the holders of 65? 000 options had indicated that they wished to purchase shares. On 2 June 2017, 65? 000 ordinary shares were issued with monies being payable by 21 June. Options not exercised duly lapsed.
- All outstanding monies were received with respect to shares issued to option holders.
- Profit for the year was $69? 420. On 30 June 2017, the directors decided to: transfer $30? 000 to the general reserve And declare a final 5c per share dividend. Shareholder approval for this dividend will be sought at the annual general meeting in September 2017.
Required
1. Prepare general journal entries, including any closing entries required, to record the above transactions.
Exercise - Shares, options, dividends and reserve transfers
The equity of Raw Prawn Ltd at 30 June 2016 consisted of:
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400 000 ordinary 'A' shares issued at $2.00, fully paid
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$800 000
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300 000 ordinary 'B' shares issued at $2.00, called to $1.20
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360 000
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50 000 6% preference shares issued at $1.50, fully paid
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75 000
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Share options issued at 60c, fully paid
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24 000
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Retained earnings
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318 000
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The options were exercisable before 28 February 2017. Each option entitled the holder to acquire two ordinary 'C' shares at $1.80 per share, the amount payable on notification to exercise the option.
The following transactions occurred during the year ended 30 June 2017.
2016 -
- Sept. 15 - The preference dividend and the final ordinary dividend of 16c per fully paid share, both declared on 30 June 2016, were paid. The directors do not need any other party to authorise the payment of dividends.
- Nov. 1 - A one-for-five renounceable rights offer was made to ordinary 'A' shareholders at an issue price of $1.90 per share. The expiry date on the offer was 30 November 2016. The issue was underwritten at a commission of $3000.
- Nov. 30 - Holders of 320? 000 shares accepted the rights offer, paying the required price per share, with the renounced rights being taken up by the underwriter. Ordinary 'A' shares were duly issued.
- Dec. 10 - Money due from the underwriter was received.
2017 -
- Jan. 10 - The directors transferred $35? 000 from retained earnings to a general reserve.
- Feb. 28 - As a result of options being exercised, 70? 000 ordinary 'C' shares were issued. Unexercised options lapsed.
- Apr. 30 - The directors made a call on the ordinary 'B' shares for 80c per share. Call money was payable by 31 May.
- May 31 - All call money was received except for that due on 15? 000 shares.
- June 18 - Shares on which the final call was unpaid were forfeited.
- June 26 - Forfeited shares were reissued, credited as paid to $2, for $1.80 per share, the balance of the forfeited shares account being refundable to the former shareholders.
- June 27 - Refund paid to former holders of forfeited shares.
- June 30 - The directors declared a 20c per share final dividend to be paid on 15 September 2017.
Required
1. Prepare general journal entries to record the above transactions.
2. Prepare the equity section of the statement of financial position as at 30 June 2017.
Exercise - Current and deferred tax
The accounting profit before tax for the year ended 30 June 2016 for Quamby Ltd amounted to $18 500 and included:
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Depreciation - motor vehicle (25%)
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$ 4 500
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Depreciation - equipment (20%)
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20 000
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Rent revenue
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16 000
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Royalty revenue (non-taxable)
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5 000
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Doubtful debts expense
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2 300
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Entertainment expense (non-deductible)
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1 500
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Proceeds on sale of equipment
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19 000
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Carrying amount of equipment sold
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18 000
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Annual leave expense
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5 000
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The draft statement of financial position at 30 June 2016 contained the following assets and liabilities.
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2016
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2015
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Assets
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Cash
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$ 11 500
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$ 9 500
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Receivables
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12 000
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14 000
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Allowance for doubtful debts
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(3 000)
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(2 500)
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Inventories
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19 000
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21 500
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Rent receivable
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2 800
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2 400
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Motor vehicle
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18 000
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18 000
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Accumulated depreciation - motor vehicle
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(15 750)
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(11 250)
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Equipment
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100 000
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130 000
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Accumulated depreciation - equipment
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(60 000)
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(52 000)
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Deferred tax asset
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?
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6 450
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136 100
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Liabilities
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Accounts payable
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15 655
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21 500
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Provision for annual leave
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4 500
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6 000
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Current tax liability
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?
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7 600
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Deferred tax liability
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?
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2 745
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37 845
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Additional information
(a) The company can claim a deduction of $15 000 (15%) for depreciation on equipment, but the motor vehicle is fully depreciated for tax purposes.
(b) The equipment sold during the year had been purchased for $30 000 2 years before the date of sale.
(c) The company tax rate is 30%.
Required
1. Prepare the current tax worksheet and the journal entry to recognise the current tax as at 30 June 2016.
2. Prepare the deferred tax worksheet and any necessary journal entries to adjust deferred tax accounts.
Assignment Files -
https://www.dropbox.com/s/x4udcu46hnhadsd/Assignment%20Files.rar?dl=0