The equity of Lochinvar Ltd at 30 June 2016 was: Share capital 50000 10% cumulative preference shares
Question:
The equity of Lochinvar Ltd at 30 June 2016 was:
Share capital 50000 10% cumulative preference shares — fully paid 100000 ordinary shares — fully paid | $ 50000 200000 | ||
Revaluation surplus Contingencies reserve Retained earnings | 250000 60000 20000 (40000) | ||
Total equity | $290000 |
During the year ended 30 June 2017, the following transactions occurred:
2016 Sept. 1 2017 March 1 March 12 April 30 June 30 | Lochinvar Ltd paid damages of $18000 awarded in a lawsuit against it. In anticipation of this, the directors had authorised the appropriation for contingencies last year. The board now directs that the reserve is to be discontinued. The directors authorised payment of dividends of 10% on the preference shares and 10c per share interim on ordinary shares out of retained earnings. Preference dividends have not been paid for 2015 or 2016. Dividends declared on 1 March were paid. The directors authorised the issue to ordinary shareholders of a bonus share issue of 1 share for every 5 held, valued at $2.60. The shares do not rank for dividend until 2018. The issue is out of the revaluation surplus. The profit before tax for the year was $370000. The directors decided to recommend to the annual general meeting a final dividend of 18c per share on ordinary shares, to come out of retained earnings. Assume the taxation rate is 30%. |
Required
A. Prepare general journal entries to record all transactions for the year.
B. Prepare a statement of changes in equity for Lochinvar Ltd for the year ended 30 June 2017.
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett