Question 3 neAlfred Company started its operation with authorization of 50,000 shares of $50 valueordinary shares and 10,000 2% cumulative preference shares of $100 par value in early 2018. In2018, Alfred has issued 2,000 ordinary shares for $300,000 cash. As at 31 December 2018, it hastreasury shares of 300 ordinary shares repurchased at a cost of $18,600.parAlfred has the following transactions in 2019:Issued 5,000 ordinary shares for $290,000 cashReissued 40 treasury shares at $68.Reissued 60 treasury shares at $60.Issued 1,000 2% cumulative preference share, for $105 per share.1 Jan26 Feb5 Jun8 AugRequireda) Record the journal entries for above transactions in 2019. (No narratives required.)Alfred Company had net income of $32,000 in the year ended 31 December 2019. Itdeclared a dividend $0.50 per outstanding ordinary share and the 2% preference shares'dividend on 30 October 2019, payable on 31 January 2020.b)Prepare the shareholders' equity section in Alfred Company's statement of financialposition at 31 December 2019.How will your answers in part (a) and (b) be different when there was a 2-for-1 share splitc)for the ordinary shares on 30 November 2019?Page 10 of 12

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Asked Dec 19, 2019
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Answer Question 3

Question 3 ne
Alfred Company started its operation with authorization of 50,000 shares of $50 value
ordinary shares and 10,000 2% cumulative preference shares of $100 par value in early 2018. In
2018, Alfred has issued 2,000 ordinary shares for $300,000 cash. As at 31 December 2018, it has
treasury shares of 300 ordinary shares repurchased at a cost of $18,600.
par
Alfred has the following transactions in 2019:
Issued 5,000 ordinary shares for $290,000 cash
Reissued 40 treasury shares at $68.
Reissued 60 treasury shares at $60.
Issued 1,000 2% cumulative preference share, for $105 per share.
1 Jan
26 Feb
5 Jun
8 Aug
Required
a) Record the journal entries for above transactions in 2019. (No narratives required.)
Alfred Company had net income of $32,000 in the year ended 31 December 2019. It
declared a dividend $0.50 per outstanding ordinary share and the 2% preference shares'
dividend on 30 October 2019, payable on 31 January 2020.
b)
Prepare the shareholders' equity section in Alfred Company's statement of financial
position at 31 December 2019.
How will your answers in part (a) and (b) be different when there was a 2-for-1 share split
c)
for the ordinary shares on 30 November 2019?
Page 10 of 12
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Question 3 ne Alfred Company started its operation with authorization of 50,000 shares of $50 value ordinary shares and 10,000 2% cumulative preference shares of $100 par value in early 2018. In 2018, Alfred has issued 2,000 ordinary shares for $300,000 cash. As at 31 December 2018, it has treasury shares of 300 ordinary shares repurchased at a cost of $18,600. par Alfred has the following transactions in 2019: Issued 5,000 ordinary shares for $290,000 cash Reissued 40 treasury shares at $68. Reissued 60 treasury shares at $60. Issued 1,000 2% cumulative preference share, for $105 per share. 1 Jan 26 Feb 5 Jun 8 Aug Required a) Record the journal entries for above transactions in 2019. (No narratives required.) Alfred Company had net income of $32,000 in the year ended 31 December 2019. It declared a dividend $0.50 per outstanding ordinary share and the 2% preference shares' dividend on 30 October 2019, payable on 31 January 2020. b) Prepare the shareholders' equity section in Alfred Company's statement of financial position at 31 December 2019. How will your answers in part (a) and (b) be different when there was a 2-for-1 share split c) for the ordinary shares on 30 November 2019? Page 10 of 12

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Expert Answer

Step 1

Journal Entries in the books of Alfred Company

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Journal entry in the books of Alfred Company Post Ref Particulars 01- Cash A/c Jan Dr To Ordinary Capital A/c To Paid-in Capital - Ordinary Capital (Being, Shares issued) Debit Credit Date 290000 250000 40000 26- Cash A/c Feb Dr To Treasury Shares To Paid-in Capital- treasury stock (Being reissue of treasury shares) 2720 2480 240 05- Jun Cash A/c Dr 3600 | Paid-in capital - Treasury stock A/c To Treasury Stock A/c (Being reissue of treasury shares) 08- Cash A/c Aug Dr Dr 120 3720 105000 To 2% Preference Share Capital A/c To Paid-in Capital - Preference Shares A/c (Being, Preference shares issued) 100000 5000

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Step 2

Working Note:

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Computation of Dividend Computation Particulars Amount Net Income 32000 Less: Preference Dividend 1000*100*2% 2000 Ordinary Shares No of Shares 7000 Less: Treasury Stock Shares Outstanding Dividend per share 200 6800 0.5 Dividend 3400 Bal in retained Earnings 26600

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Step 3

Balance sh...

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Alfred Company Balance Sheet (Partial) As on 31st December, 2019 Amount Amount in $ Particulars in $ Equity Ordinary Shares 350000 Preference Shares 100000 Paid-in Capital - Ordinary Capital Paid-in Capital - Preference 240000 Shares 5000 695000 Less: Treasury Share Paid-in Capital - Treasury share Retained Earnings 12400 120 12520 26600 734120

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