Equity Accounting

Alpha Ltd has an authorized share capital of 1,000,000 ordinary shares of $0.50 each. On 1 January 20X1, Alpha Ltd issued 400,000 of these shares at par value for cash. What is the balance on the Ordinary Share Capital account after this issue?

• $100,000

• $200,000

• $400,000

• $500,000

Beta Plc issued 100,000 ordinary shares of $1 nominal value at a price of $1.50 per share for cash. What is the total amount credited to the Share Premium account as a result of this issue?

• $50,000

• $100,000

• $150,000

• $250,000

Gamma Co made a 1 for 4 bonus issue of ordinary shares. The company utilized its share premium account for this purpose. Which of the following is the correct journal entry to record this bonus issue?

• Debit Cash, Credit Ordinary Share Capital

• Debit Retained Earnings, Credit Ordinary Share Capital

• Debit Share Premium, Credit Ordinary Share Capital

• Debit Ordinary Share Capital, Credit Share Premium

Delta Ltd had the following equity balances at 1 January 20X2: Ordinary Share Capital (500,000 shares of $0.25 each): $125,000 Share Premium: $80,000 Retained Earnings: $250,000 On 1 March 20X2, Delta Ltd made a rights issue of 1 new share for every 5 shares held, at a price of $0.60 per share. The rights issue was fully subscribed. What are the balances on the Ordinary Share Capital and Share Premium accounts immediately after the rights issue?

• Share Capital $150,000, Share Premium $115,000

• Share Capital $150,000, Share Premium $120,000

• Share Capital $185,000, Share Premium $80,000

• Share Capital $125,000, Share Premium $140,000

Epsilon Plc had the following balances in equity at 31 December 20X1: Ordinary Share Capital (200,000 shares of $1 each): $200,000 Share Premium: $30,000 Retained Earnings: $300,000 During the year ended 31 December 20X2, Epsilon Plc made a bonus issue of 1 new share for every 4 shares held. The share premium account was used to the fullest extent possible, with the remainder financed from retained earnings. What amount was debited to Retained Earnings for this bonus issue?

• $Nil

• $20,000

• $30,000

• $50,000

Zeta Co had retained earnings of $150,000 at the start of the year. During the year, the company reported a profit after tax of $75,000. The retained earnings at the end of the year were $180,000. The company made no bonus issues from retained earnings.
What was the total dividend paid during the year?

• $30,000

• $45,000

• $75,000

• $105,000

Eta Plc's equity at 1 January 20X3 was:
Ordinary Share Capital (1,000,000 shares of $0.50 each): $500,000
Share Premium: $200,000
Retained Earnings: $700,000

On 1 April 20X3, Eta Plc made a rights issue of 1 new share for every 4 shares held at $1.20 per share. The issue was fully subscribed.
On 1 October 20X3, Eta Plc made a bonus issue of 1 new share for every 5 shares held, utilizing share premium first, then retained earnings if necessary.
The profit for the year ended 31 December 20X3 was $150,000, and a final dividend of $0.10 per share (on shares in issue at year-end) was proposed and paid before the year-end.

What is the balance on Retained Earnings at 31 December 20X3?

• $670,000

• $675,000

• $700,000

• $725,000

Theta Ltd made a rights issue of 2 new shares for every 5 existing shares at $2.00 per share. The company had 500,000 ordinary shares of $0.50 nominal value in issue before the rights issue. Cash of $350,000 was received by the year-end, with the remainder expected shortly after. The company's accountant debited Cash $350,000 and credited a Suspense account $350,000. No other entries have been made for the rights issue.

Which of the following journal entries correctly records the full rights issue and clears the suspense account?

• Dr Suspense $350,000, Dr Other Receivables $50,000, Cr Ordinary Share Capital $100,000, Cr Share Premium $300,000

• Dr Suspense $350,000, Dr Other Receivables $50,000, Cr Ordinary Share Capital $200,000, Cr Share Premium $200,000

• Dr Suspense $350,000, Cr Ordinary Share Capital $50,000, Cr Share Premium $300,000

• Dr Cash $350,000, Dr Other Receivables $50,000, Cr Ordinary Share Capital $100,000, Cr Share Premium $300,000

The nominal value of each share is $1. The company policy is to use share premium to the fullest extent for bonus issues.
What are the values of X, Y, and Z?

• X = $120,000, Y = $0, Z = $870,000

• X = $70,000, Y = $50,000, Z = $820,000

• X = $50,000, Y = $70,000, Z = $800,000

• X = $0, Y = $120,000, Z = $750,000