7111AFE Management Accounting
Task:
1.When preparing the financial statements of Somersby Ltd, the accountant found the following information: Opening balance of Retained Earnings $15,000; Interim Dividends paid $2,500 (from dividends payable); Profit earned $20,000; Dividends Declared $5,000. The closing balance of Retained Earnings for Somersby Ltd is:
a.$7,500.
b.$30,000.
c.$27,500.
d.$15,000.
e.None of the above is correct.
2.A share split has the following impact on equity:
a.Increase total equity.
b.Decrease total equity.
c.Removal of equity from the statement of financial position.
d.Decrease the total number of shares.
e.No change in total equity.
3.Segregation of duties involves:
a.Ensuring that only employees with appropriate accounting qualifications work in the accounting department.
b.Providing each staff member with an individual password.
c.Physically protecting blank checks and cash.
d.One person being responsible for one task.
e.None of the above is a violation of segregation of duties.
4.A cash payments journal is used to record:
a.Sales of inventory on account.
b.Purchases of inventory on credit.
c.Correcting and adjusting entries.
d.Only cash purchases of inventory.
e.All cash paid out including cash purchases of inventory.
Problem 1
1.Prepare journal entries for each of the following transactions for ABL Ltd that started operations in September 2019:
In September 2019, ABC Ltd issued a prospectus offering 500 000 shares at $3.00 per share with $2 payable at the time of application, $0.50 payable on allotment and $0.50 on call. On 15 October, the directors allotted 500 000 shares to subscribers. The call was receivable on 15 November 2019 and all amounts due were collected on 30 November.
On 10 December 2019, the directors of ABC Ltd declared a 10% share dividend to be paid out of the balance in the Retained Earnings account on 20 December 2019.
2.ance of Share capital and Retained Earnings accounts at 31 December 2019 (Profit for the year ended 31 December 2019 was $800,000):
Share capital:
Retained earnings:
