HI5020 Corporate Accounting Online Exam
Question 1 (10 marks)
Prepare general journal entries to record the following unrelated transactions of a limited company:
- Payment of an interim dividend of $400,000 (in cash).
- Declaration of a final dividend of $840,000.
- Transfer of $240,000 to the general reserve from retained earnings.
- Payment of 600,000 bonus shares, fully paid at $1 per share from a general reserve.
- Issued 500,000 shares for $30,000,000 by a private placement.
ANSWER: ** Answer box will enlarge as you type
- Interim Dividend 400,000
Bank 400,000
(To record interim dividend paid)
At the end of the financial year:
Retained earnings 400,000
Interim Dividend 400,000
(To record recognition of interim dividend paid from retained earnings)
- Final Dividend declared 840,000
Dividend Payable 840,000
(To record final dividend declared for year)
Retained earnings 840,000
Final Dividend declared 840,000
(To record payment of dividend from retained earnings)
- Retained earnings 240,000
General reserve 240,000
(To record transfer to general reserve from retained earnings)
- General reserve 600,000
Share Capital 600,000
(To record issue of bonus shares from a general reserve)
- Cash 30,000,000
Share Capital 30,000,000
(To record issue of 500,000 shares at $60 by private placement)
Question 2 (10 marks)
On 1 January 2019 Liam Ltd acquired 90% of the issued shares of Ian Ltd. During the year ended 31 December 2019 the following intra group transactions occurred:
- Sales of inventory:
Ian Ltd sold inventory to Liam Ltd $360,000. This inventory costed Ian Ltd $300,000. At 31 December 2019 Liam Ltd held 50% of the inventory acquired from Ian Ltd.
- Intragroup sale of equipment:
An item of equipment originally acquired by Liam Ltd on 1 January 2017 at a cost of $400,000 was sold to Ian Ltd on 1 January 2019 for $340,000. Liam Ltd had depreciated this asset at 10% per annum on a straight-line basis with no scrap value. There is no change in the asset expected life subsequent to the sale.
- During the year ended 31 December 2019 the following dividends were paid:
- Liam Ltd $100,000
- Ian Ltd $40,000
- On 30 June 2019 Liam Ltd lent Ian Ltd $100,000. Interest on this loan at 8% was paid up to 31 December 2019.
Required:
Prepare the consolidation journal entries required to eliminate the above intragroup transactions for the year ended 31 December 2019. Assume a tax rate of 30%.
ANSWER:
Cash 360,000
Sales Revenue 360,000
(To record the sales revenue)
Cost of sales 300,000
Inventory 300000
(To record a cost of sale of inventory)
Cash 340000
