Module16

Question 1

What are the journal entries when an a shareholder invests in share capital at the nominal value?

Answer 1

Dr Bank

Cr Share cap (equity)

Question 2

What are the journal entries when an a shareholder invests in share capital exceeding nominal value?

Answer 2

Dr Bank
Cr Share cap
Cr Share premium

Question 3

What are the journal entries when a company incurs an annual taxation charge?

Answer 3

Dr SPL -taxation

Cr Current tax payable

Question 4

What are dividends?

Answer 4

Distribution of profit to shareholders from retained earnings.

Question 5

What are the journal entries when a company pays dividends to its shareholders?

Answer 5

Dr Retained earnings

Cr Bank

Question 6

what are the journal entires when a company issues bonds/debentures?

Answer 6

Dr Bank

Cr Bonds/debentures

Question 7

why are finance costs incurred from bonds/debentures?

Answer 7

from the interest rate that is applied to its nominal value

Question 8

what are the journal entires when a company pays interest on a bond/debenture?

Answer 8

Dr SPL-finance costs

Cr Bank

Question 9

What happens if a bond/debenture is issued part way through the year?

Answer 9

interest will not be paid and so will have to be accrued. The interest must be accrued within the bond/debenture itself

Question 10

What are the journal entries when a company accrues interest on a bond/debentures?

Answer 10

Dr SPL- finance costs

Cr Bonds/Debentures. (creates a liability)

Question 11

What should a company do if the amount paid on redemption date exceeds the carrying amount?

Answer 11

Recognise a loss

Question 12

What should a company do if the amount paid on redemption date is lower than the carrying amount?

Answer 12

Recognise a gain

Question 13

What is the journal entry when a company redeems a bond/debenture at its carrying amount?

Answer 13

Dr Bonds/debentures

Cr Bank

Question 14

What is the revaluation model?

Answer 14

measure PPE at its historical cost less accumulated depreciation then allows any subsequent revaluation to fair value (most likely the market value).
WE WILL ONLY DEAL WITH REVALUATION INCREASES

Question 15

What are the journal entries when a company increases the carrying amount of PPE?

Answer 15

Dr Property -cost
Dr Property -accumulated depreciation (need to reset to nil)
Cr Revaluation surplus (difference between carrying and fair value)

Question 16

How should depreciation be recalculated for a revalued asset?

Answer 16

using its fair value and REMAINING useful life.

Question 17

How will this course calculate the annual transfer from revaluation surplus to retained earnings?

Answer 17

revaluation increase divided by the remaining useful economic life of the asset.

Question 18

What are the journal entires when a company makes an annual transfer from the revaluation surplus to retained earnings.

Answer 18

DR Revaluation surplus

Cr Retained earnings

Question 19

What are the journal entries required when company disposes of a revalued asset?

Answer 19

Same as cost model but require the additional entry of transferring carrying amount of revaluation surplus to retained earnings.