Question

ported the following summarized balance sheet at $37,600 6.London Gems Company reported the following summarized balance December 31, 20X6: Liabilities and Equity Liabilities Shareholders guity $0.6 cumulative preference shares. S1Spar, 400shares issued Ordinary shares, $2 par, 6,300 shares issued Paid-in capital in excess of par cained earnings Total Liabilities and Equity 6,000 12,600 17,400 23,000 $96,600 During 20X7, London completed these transactions that affected shareholders' equity: Feb 13 Issued 5,000 ordinary shares for $6 per share. Jun 17 Declared the regular cash dividend on the preference shares. Jun 24 Paid the cash dividend. Aug 9 Distributed a 20% share dividend on the ordinary share. Market price of the _ ardinary share was 57 per share. Oct 26 Reacquired 800 ordinary shares as treasury shares, paying S8 per share. Nov 20 Sold 600 shares of the treasury shares for S12 per share. Requirements Lumalizo London's transactions. Explanations are not required.(10marks)

Answer 1

WORKING NOTES:
		CALCULATION OF NUMBER OF SHARES OF SHARE DIVIDEND
		Beginning Shares =	6,300	Shares
		Add: Issued during year	5,000	Shares
		Total	11,300	Shares
		20% of the same issued as share dividedn	2,260	Shares
		Market Price Per shares =	$                         7.00
		Value of Stock Dividend	$                    15,820
SOLUTION :
Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	Feb, 13	Cash (5000 Shares X $ 6)	$30,000
		Share Capital - Ordinary (5,000 Shares X $ 2)		$10,000
		Paid in Capital in excess of par		$20,000
		Retaiend Earning ( 400 Shares X $ 0.6)	$240
2	June, 17	Dividend Payable - Preferred Shares		$240
3	June, 24	Dividend Payable - Preferred Shares	$240
		Cash		$240
4	Aug, 09	Retained Earnings (2260 Shares X $ 7)	$15,820
		Share Capital - Ordinary (2,260 Shares X $ 2)		$4,520
		Paid in Capital in excess of par		$11,300
		Treasurry Stock (800 Shares X $ 8)	$6,400
5	Oct, 26	Cash		$6,400
6	Nov, 20	Cash (600 X $ 12)	$7,200
		Treasurry Stock (600 Shares X $ 8)		$4,800
		Paid in Capital in excess of par - Treasurry Stock		$2,400