On 1 July 2018, Popular Ltd had the following issued capital: 50,000 10% Redeemable preference shares issued at $2 each $100,000 The following transactions occurred during 2021. March 1 A disclosure document was issued inviting applications for 100 000 ordinary shares at an issue price of $2.50, payable in full on application. The main purpose of the issue was to fund the redemption of the preference shares. March 31 The issue was fully subscribed and all money due was received. The shares were then allotted. April 10 The preference shares were redeemed at a price of $2.10 per share. The shares had been classified as equity in the financial statements. For the above transactions the Accountant recorded the following journal entries: March 31 Dr Cash Trust 250,000 Cr Application – Ordinary 250,000 Dr Application – Ordinary 250,000 Cr Share Capital – Ordinary 250,000 Dr Cash 250,000 Cr Cash Trust 250,000 April 10 Dr Share Capital – Preference 100,000 Dr Retained Earnings (premium) 5,000 Cr Shareholder’s redemption 105,000 Dr Shareholder’s redemption 105,000 Cr Cash 105,000 Required Explain why the above entries are made, noting the adjustment to each account separately.
On 1 July 2018, Popular Ltd had the following issued capital: 50,000 10% Redeemable preference shares issued at $2 each $100,000 The following transactions occurred during 2021. March 1 A disclosure document was issued inviting applications for 100 000 ordinary shares at an issue price of $2.50, payable in full on application. The main purpose of the issue was to fund the redemption of the preference shares. March 31 The issue was fully subscribed and all money due was received. The shares were then allotted. April 10 The preference shares were redeemed at a price of $2.10 per share. The shares had been classified as equity in the financial statements. For the above transactions the Accountant recorded the following journal entries: March 31 Dr Cash Trust 250,000 Cr Application – Ordinary 250,000 Dr Application – Ordinary 250,000 Cr Share Capital – Ordinary 250,000 Dr Cash 250,000 Cr Cash Trust 250,000 April 10 Dr Share Capital – Preference 100,000 Dr Retained Earnings (premium) 5,000 Cr Shareholder’s redemption 105,000 Dr Shareholder’s redemption 105,000 Cr Cash 105,000 Required Explain why the above entries are made, noting the adjustment to each account separately.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter10: Stockholder's Equity
Section: Chapter Questions
Problem 85PSB: Common Dividends Thompson Payroll Service began in 2019 with 1,500,000 authorized and 820,000 issued...
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On 1 July 2018, Popular Ltd had the following issued capital:
50,000 10% Redeemable preference shares issued at $2 each $100,000
The following transactions occurred during 2021.
March
1
A disclosure document was issued inviting applications for 100 000 ordinary shares at an issue price of $2.50, payable in full on application. The main purpose of the issue was to fund the redemption of the preference shares.
March
31
The issue was fully subscribed and all money due was received. The shares were then allotted.
April
10
The preference shares were redeemed at a price of $2.10 per share. The shares had been classified as equity in the financial statements.
For the above transactions the Accountant recorded the following journal entries:
March 31
Dr Cash Trust
250,000
Cr Application – Ordinary
250,000
Dr Application – Ordinary
250,000
Cr Share Capital – Ordinary
250,000
Dr Cash
250,000
Cr Cash Trust
250,000
April 10
Dr Share Capital – Preference
100,000
Dr Retained Earnings (premium)
5,000
Cr Shareholder’s redemption
105,000
Dr Shareholder’s redemption
105,000
Cr Cash
105,000
Required
Explain why the above entries are made, noting the adjustment to each account separately.
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