Question

these last 3 pics from stage 1 and 2 has information needed to answer stage 3. thanks

ZHL held its annual general meeting as intended on the 10th October 20X3 and the final dividend determined in the previous fi nal I year was approved, dedared and On the 30th October 2003 60% of ordinary shareholders advised ZHL that they elected to take shares instead of dividends under the terms of the DRP conditions previously advised. The 60% was evenly spread across the two shareholder groups. ZHL was having another good year and the Board of Directors wanted to reward the shareholders. As a result it decided to undertake a bonus share issue to all ordinary shareholders to be paid out of the retained profits. These shareholders received 1 bonus share for every 10 shares held. The bonus shares were issued on the 15th November 20X3 at the share price on that day The company decided to continue paying an interim dividend and on the 15th February 20X4 it declared and paid the interim dividend at 3 cents per share. The following are a selection of ASX share prices for ZHL Closing Share Price Closing Share Price Date Date $1.33 1/11/20x3 $1.28 10/1/20X4 $1.30 10/11/20X3 $1.29 22/1/20X4 15/11/20X3 $1.25 31/1/20X4 $1.30 27/11/20X3 $1.30 2/2/20x4 $1.22 $1.31 $1.19 1/12/20x3 12/2/20X4 12/12/20X3 $1.32 15/2/20X4 $1.26 $1.35 $1.29 29/12/20X3 24/2/20X4 $1.38 3/1/20x4 $1.32 1/3/20x4 REQUIREMENTS FOR STAGE 3 1 From the above and previous information prepare all the general journal entries that relate equity transactions that occurred for the year ended 30h june 20X4 for Zermatt Holdings Ltd. 38 marks 2. Calculate how many Ordinary shares are on issue after the payment of the interim dividend on 15h February 20X4. This involves a careful understanding of all the transactions involving share issues since the company began and tracking the 12 marks individual shareholder groups HINT Before paying the interim dividend in Part 1 it might be a good idea to consider the calculations required to answer Part 2 ACCOUNTING METHOD II EQUITY ASSIGNMENT STAGE 2JOURNAL ENTRIES SUGGESTED SOLUTION 10,000,000 shares issued. Share price: $1.20; 80% take up @ 90% share price.. Rights offer is 1:10 Cash received 10,000,000*80%*$1.20*90%/10 $864,000 NB It will be important to track the different groups shareholders now-ie those who took up the rights and those who didn't. Date Particulars CR DR 20x2 Cash at Bank 864,000 Sept 30 Share Capital- Ordinary 864,000 Non-renounceable shares rights issue at 1:10 at 905 share price of $1.20 with 80% take u DR Date Particulars CR Preference share dividend 25,000 Nov 30 Cash at Bank 25,000 (Payment of 6 month's preference share dividend) The Rights issues resulted in a further 800,000 ordinary share being issued. This made the total ordinary shares on issue to be (8,000,000+800,000)+ (2,000,000) 10,800,000 Interim dividend then 10,800,000 $0.03-$324,000 Date Particulars DR CR 20X3 Ordinary shares interim dividend- Feb 15 Cash at Bank 324,000 of ordinary interim Date Particulars DR CR Preference share dividend 20X3 25,000 Apr 30 Cash at Bank 25,000 (Payment of 6 month's preference share dividend) Particulars Date DR CR 20x1 Cash at Bank 625,000 Share capital preference Nov 1 625,000 (Issue of 25,000 8%pa preference shares paid to $25 Particulars Date DR CR 20x2 Preference share dividend 25,000 Apr 30 Cash at Bank 25,000 (Payment of 6 month's preference share dividend TE Dividends can operate through a Payables account to manage all the payments BUT it must paid to the shareholders and not just remain in a payables account. Balance Sheet of Zermatt Holdings Ltd As at 30th June 20X2 Equity Ordinary share capital 8% Preference share capital Retained profits 9.872,000 625,000 823,000 Total Equity

Answer 1

Zermatt Holdings Ltd Journal Entries Debit (S) Credit (S) Date Particulars 15 Nov 20X3Retained Earnings 1350000 Share Capital-Ordina 1350000 To record the bonus issue 30 Nov 20X3 Preference Share Dividend 25000 Cash at Bank 25000 To record the payment of preference dividend 15 Feb 20X4 lOrdinary shares interim dividend 356400 Cash at Bank 356400 To record the payment of interim dividend 30 Apr 20X4 Preference Share Dividend 25000 Cash at Bank 25000 To record the payment of preference dividend Note 1: Calculation of Capitalised profit in Bonus issue -10800000/10*1.25 -1350000 Note 2: Calculation of amount for interim dividend -( 10800000+( 10800000*1/10)) * 3% -356400

2) Calculation of Number of ordinary shares on issue Particulars No. Total ordinary shares on issue as on Feb 15, 20X3 10800000 Bonus Issue (10800000 1/10) 1080000 Total ordinary shares on issue 11GUKKX) Note 1: Total ordinary shares on issue as on Feb 15, 20X3 is adjusted will all previous issues made.