Financial Accounting (MGT401)
Assignment # 2
1) Journal entries to give effect to the above resolution
SOLUTION
Journal Entries
Rs. Rs.
(1) Debit :Accumulated Profits 100000
Debit: General Reserves 170000
Debit: Share Premium 150000
Credit: Bonus to shareholders Account 420000
Debit: bonus to shareholders Account 420000
Credit: share capital 300000
Credit: Share Premium Account 120000
(2) Debit: Shareholders Account 360000
Credit: Share Capital 300000
Credit: Share Premium Account 60000
Debit: bank Account 360000
Credit: Shareholders Account 360000
(3) Debit: share capital 100000
Debit: Share Premium /Accumulated profit 20000
Credit: Cash account 120000
Debit: Accumulated Profits 100000
Credit: Capital Repurchase Reserve 100000
1) Revised Balance sheet (Equity portion only)
SOLUTION
Model Company Limited
Revised Balance Sheet
As on 30 June,2010
Rs.
Authorized Capital
1000000 Ordinary shares of Rs. 10 each 10000000 
Paid Up capital
125000 shares of Rs. 10 each 1250000
Reserves
Accumulated profits 30000
General Reserves 280000
Share Premium 180000
Capital Repurchase reserve 100000
Total Equity 1840000
2) Necessary working schedules
SOLUTION
Working Schedules:
Working #1
Number of bonus shares Issued = 75000 * (4/10)
=7500*4
= 30000 bonus shares
Amount of bonus shares = 30000*14
= Rs. 420000
Amount Transfer to share Capital = number of bonus shares issued * Nominal price/share
= 30000* Rs.10
= Rs.300000
Amount Transfer to share premium account = number of bonus shares issued * premium/share
=30000*Rs.4
= Rs.120000
Working #2
Number of right shares issued= 75000*(2/5)
= 15000*2
= 30000 right shares
Amount of right shares = number of right shares issued * issued price /share
= 30000 * 12
= Rs.360000
Amount transfer to Share Capital = Number of right shares issued * nominal price /share
=30000* Rs.10
= Rs30000
Amount Transfer to Share Premium Account = Number of shares issued* Premium/share
= 30000*Rs.2
= Rs.60000
Working #3
Amount of shares repurchased = number of shares repurchased*issued price per share
= 10000* Rs.12
= Rs.120000
Reduction in Paid up capital = number of shares repurchased * Nominal Value per share
= 10000* Rs.10
=Rs.100000
Reduction in Share Premium Account = Number of shares repurchased* premium per share
= 10000* Rs.2
= Rs.20000
Working # 4
Existing shares 75000
Bonus Shares Issued 30000
Right shares Issued 30000
Shares Purchased (10000)
Total Paid Up Capital 125000
Accumulated profits =( Existing accumulated profits – used for bonus shares- used for the payment of premium on repurchased shares – nominal Amount of repurchased shares transfer to Capital Repurchased reserve)
= Rs.250000 – Rs.100000 – Rs.20000 - Rs.100000
= Rs.30000
General reserves = Existing general reserves – used for bonus shares
= Rs. 450000 – Rs.170000
= Rs.280000
Share Premium reserve= existing share premium – used for bonus shares + premium received on bonus shares + premium received on right shares
= Rs.150000 – Rs.150000 + Rs.120000 +Rrs.60000
= Rs.180000
Capital repurchased reserve = Number of repurchased shares * Nominal price per share
= 10000 * Rs.10
= Rs.100000
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