Case Study $2$

You are employed as the assistant accountant of the Finance team $($General Ledger GL section$)$ of Leica Inc., a company listed in the Australian Stock Exchange $($ASX$).$ The responsibility of the GL section is to manage the chart of accounts and ensure all journal postings to the GL is effectively processed in the accounting mainframe system $($in accordance with organisational policies and procedures as attached$).$

You have been provided with the following information and your manager, has requested that you, complete journal entries and the retained earnings account $($ledger$)$ for the period ending $30$ June of the current year.

The shareholders$$ equity of Leica Inc. as at $1$ July, consisted of:

$

Share capital $9\%$ fully paid preference shares, issue price $$1\mathrm{.}00150,000$

Share capital $$ fully paid ordinary shares, issue price $$1\mathrm{.}00150,000$

General reserve $30,000$

Asset revaluation reserve $20,000$

Retained earnings $70,000$

The following events occurred during the year ended $30$ June:

$

September Dividends paid for the prior year

Preference shares

Ordinary shares $$ Final Dividend

$13,500$

$5,000$

January Interim dividend of $5$ cents per ordinary share declared and paid

February Land held by the company was revalued upwards by $$10,000$

The balance in the asset revaluation reserve was used for a $1-$for$-5$ bonus issue of fully paid ordinary shares, issue price $$1\mathrm{.}00$

June Net profit before tax

Income tax expense charged to profit and loss

The declaration of the preference dividend and an ordinary final dividend of $5$ cents per share recommended by the directors

$400,000$

$162,000$

Required:

$($a$)$ Prepare general journal entries to record the above events.

$($b$)$ Prepare the retained earnings account for the year ended $30$ June.