QUESTION 1
On 1 January 2014 Italy Ltd was registered as a public company that use 31 December as the end of the financial year. On 5 January 2014, a prospectus was issued inviting applications for 300,000 shares at a price of $4 per share on the following terms:
- $2 on application,
- $1 on allotment,
- 50 cents on call one,
- balance on call two,
Call one was made three months after the date of allotment, and call two was made six months after the date of allotment.
By 31 January 2014, applications were received for 380,000 shares of which applicants for 40,000 shares forwarded the full $4 per share. On 7 February 2014, at the directors' meeting it was decided:
- To allot ordinary shares in full to applications who had paid in full on application
- To allot the remaining shares to the applicants on a pro rata basis.
The surplus application money was offset against the amount payable on allotment.
The balance of the allotment money was received by 15 February 2014. $15,000 of share issue cost was paid on 31 February 2014. The two calls were made on the dates stated in the prospectus, and a month after, each call monies were received, except that the holders of 15,000 shares did not pay call two.
Required:
a) Prepare entries in general journal form to record the above transactions (show you workings)
b) Prepare a Statement of Shareholders' Equity for Italy Ltd as at 31 December 2014.
QUESTION 2
The listing of the ledger accounts (unadjusted) of Cooper Manufacturing Limited at 30 September 2014 is presented below. Account Name Balance ($)
Sales 6,000,000
Prepaid insurance 48,000
Factory Rent 152,000
Office salaries 690,000
Direct Labour 1,300,000
Raw Materials Purchases 1,572,000
Factory Supplies 64,000
Finished Goods-1 October 2013 500,000
Work in Process-1 October 2013 246,000
Raw Materials- 1 October 2013 150,000
Plant energy costs 148,000
Indirect Labour 116,000
Selling & Distribution Expenses 170,000
Interest and other operating expenses 150,000
Machinery and equipment 535,000
Accumulated depreciation-Machinery and equipment 200,000
The following additional information is available:
1. The inventories as at 30 September 2014 were: Raw materials $112,000 Work in process $261,000 Finished goods $440,000
2. On 1 July 2014 the company paid $48,000 for 12 months insurance cover on the factory. Prepaid insurance was debited at the time of the transaction.
3. Office salaries of $10,000 are unpaid at 30 September 2014.
4. The Machinery and Equipment account comprises $320,000 of factory machinery and the balance for office equipment. All machinery and equipment are depreciated using the straight line method over a 5 year life with a residual value of $20,000 for Machinery and $15,000 for Office equipment. There were no machinery and equipment acquisitions or disposals during 2013-2014.
Required:
a) Prepare the Costs of Goods Manufactured statement for the year ended 30 September 2014.
b) Prepare an income statement for the year ended 30 September 2014.