TUTORIAL ANSWER

ACCOUNTING FOR CORPORATION

QUESTION 1

a) Mac 13 Dr Cash (RM1.50 x 30,000) 45,000

Cr Equity Share 45,000

June 25 Dr Land (25,000 x RM12) 300,000

Cr 8% Preference Share 300,000

Nov 30 Dr Retained Earnings 500,000

Cr Dividend Payable 500,000

Dec 1 No entry

Dec 15 Dr Dividend Payable 500,000

Cr Cash 500,000

Dec 31 Dr Income summary 200,000

Cr Retained Earnings 200,000

b)
Rainbow Bhd
Statement of Financial Position (partial) as at 31 December 2017

RM
Sharholders’ Equity

Paid-Up Capital

Preference share 8%, 60,000 units (35,000 + 25,000) 1,000,000 (700,000 + 300,000)
Equity share, 130,000 units (100,000 + 30,000) 145,000 (100,000 + 45,000)

Retained Earnings (RM1,105,000 – 500,000 + 200,000) 805,000

QUESTION 2

a) Jan 18 Dr Cash (RM1.90 x 100,000) 190,000√

Cr Equity Share 190,000√

May 7 Dr Land (35,000 x RM1.80) 63,000√

Cr Equity Share 63,000√

July 5 Dr Cash (RM28 x 1,000) 28,000√

Cr Cumulative Preference Share 8% 28,000√

Dec 8 Dr Retained Earnings 380,000√

Cr Dividend Payable 380,000√

Oct 10 No entry (share split – refer calculation *) √

Nov 15 No entry (share dividen – refer calculation **) √

Dec 30 Dr Dividend Payable 380,000√

Cr Cash 380,000√

Dec 31 Dt Income summary 326,100√

Cr Retained Earnings 326,100√

* Share split calculation

Before shares split:
Total units of equity shares = 300,000 + 100,000 + 35,000 = 435,000 units
Market share price= RM1.5 per unit

After shares split:

1 share split into 2 shares = 435,000 units x 2
Total units of equity shares after share split = 870,000 units
Market share price = RM1.50 / 2 = RM0.75 per unit

** Share dividend calculation

Total units of equity shares = 870,000 units
8% share dividend = 8% x 870,000 units = 69,600 units share dividend
Total units of equity shares = 870,000 + 69,600 units = 939,600 units
Market share price = RM1 per unit
b) Calculation of cash dividend distribution to the shareholders:

Refer transaction on August 8

Total dividend declared RM 380,000

Distributed to cumulative preference shares for year 2016 (8% x 1,528,000) (122,240)
Distributed to cumulative preference shares for year 2017 (8% x 1,528,000) (122,240)
Balance to be distributed to equity shareholders 135,520

c)
LaLa Bhd
Statement of Financial Position (partial) as at 31 December 2017√

RM
Sharholders’ Equity
Paid-Up Capital
Cumulative Preference Share 8%
Issued and fully paid, 801,000 units (800,000 + 1,000) 1,528,000√√ (1,500,000+28,000)

Equity Share
Issued and fully paid, 939,600 unit (after share split & share dividend) 939,600 √√ (939,600 x RM1)

Retained Earnings (RM515,000 – 380,000 + 326,100) 461,100√√