(a) Acquisition of PPE against cash

Dr. PPE Cost (NCA)

Cr. Cash
(b) Depricition of PPE for the year
Dr. Depreciation expense (SCI)
Cr. Accumulated expense
Disposal of PPE (at date of sale)
Dr. Disposal
Cr. PPE cost
(with the cost of PPE sold at the date of disposal)
Dr. Accumulated Depreciation
Cr. Disposal
(with accumulated depreciation of PPE sold at the date of disposal)
Dr. Cash
Cr. Disposal
(with the amount of sale proceeds received at the date of disposal)
Dr. Disposal
Cr. Gain
(d) Non cash addition to PPE (Asset acquired /added for consideration other than cash)
Dr. PPE Cost
Cr. Revaluation Reserve
(With the amount of increase in market value of the asset during the year)
Dr. PPE Cost
Cr. Finance Lease Liability
Dr. PPE Cost
Cr. Debentures/Loan Notes/supplier
(With the amount of asset acquired against issue of loans during the year)
Dr. PPE Cost
Cr. Share capital/Premium
(With the amount of asset acquired against issue of shares during the year)
Extract from the statements of financial position of C Ltd.
$ $ $ $ $
Non current assets Cost/valuation Depreciation NBV Cost/valuation Depreciation
Land and buildings 21,500 1,750 19,750 5,500 680
Plant 18,500 1,250 17,250 4,500 320
40,000 3,000 37,000 10,000 1,000
30-Sep-01 30-Sep-00
Illustration # 1
1. PROPERTY ,PLANT AND EQUIPMENT (PPE)
Equity and Reserves
Capital shares @ $1 each
On 1 oct 2000 C ltd recorded an increase in the vfalue of its land of $5000.
On 31st jan 2001 C Ltd. Bought land against the consideration of 5000 equity shares.
A plant was acquired under finance lease liability worth $1000.
Answer:
PPE Cost
$ $
Opening balance 10,000 Disposal 5,000
Cash (balancing fig.) 22,000
Revaluation reserve 5,000
Share Capital 5,000
finance Lease Liability 1,000
Creditors/Loan 2,000 Closing balance 40,000
45,000 45,000
$ $
Disposal 4,000 opening balance 1,000
closing balance 3,000 depreciation expense (balancing figure) 6,000
7,000 7,000
PPE Disposal
$ $
PPE Cost 5,000 PPE Acc. Depreciation 4,000
Profit 2,000 Receivables 1,000
Cash (Balancing fig.) 2,000
7,000 7,000
(a) booking of interest expense in the SCI
Dr. Interst Expense (SCI)
Cr. Interest payable (CL in SFP)
(With the amount of interest expense booked during the year)
(b) Payment of interest Liability )
Dr. interest payable
Cr. Cash
(With the amount of interest liabilty paid during the year)
During the year an item of plant that had cost $5000 and had accumulated depreciation of $4000 was sold for cash against a profit of
$2000 .Of this $1000 was still unpaid on 30 sep 2001.
a building was bought on 15th sep 2001 partly paid in cash and remaining payment of $2000 due on 30 nov 2001.
Required: Calculate the cah purchase for purchases of PPE ,cash received from dosposal of fixed assets, depreciation charged to SCI
and profit/loss on disposal.
2. Interest Expense
3. Tax Expense
(a) Booking of Tax expense in SCI
Dr. Tax expense(SCI)
Cr. Tax payable (CL in SFP)
(With the amount of Tax expense booked during the year)
(b) Payment of Tax liability
Dr. Tax payable
Cr. Cash
(With the amount of tax liability paid during the year)
Co. A needs $1000 :
If it issues 10% debentures then:
Dr. Cash 1000
Cr. Debenture/Loan stock 1000
If it Issues 10% Loan Notes of $1000 then:
Dr. Interest Expense 100
Cr. Interest Payable 100
If any premium is earned then:
Dr. Loan Note
Cr. Share Premium
(With the amount of Premium earned during the year)
Dividend expense
(a) booking of Dividend in SCE
Dr. Dividend (SCE)
Cr. Dividend Payable (CL in SFP)
(With the amount of dividend declared during the year)
(b) Payment of Dividend Liablity
Dr. Dividend Payable
Cr. Cash
(With the amount of dividend liability paid during the year)
(a) Booking of Interest/Investment/Dividend income in the Sci
Dr. Interest Income/Investment Income/Dividend Income Receivale (CA in SFP)
Cr. Interest Income/Investment Income/Dividend Income (SCI)
(With the amount of Interest/Investment/Dividend Income booked during the year)
(b) Receipt of Interest/Investment/Dividend
Dr. Cash
Cr. Interest Income/Investment income/Dividend income receivable
(With the amount of Interest/Investment/Dividend Income received during the year)
In relation to share capital and premium three types of values are relevant:
1. Nominal/Face/Par Value(NV): Share capital is always credited in company's book at (NV).
4. Debentures and Loan Notes
5. Dividend Declared /Proposed/Recommended
6. Interest Income/Investment Income/Dividend Income
7. Share Capital & Premium
2. Market Value (MV): Company has nothing to do with MV. This is relevant for share holders.
3. Issue Price : The price at which the company receives cash from shareholders.
Example:
On 1st jan 2009 (Date of Incorporation) the compan issued $1 10,000 shares for $3.0.On 31 dec 2009 Company's Share price rose to $7.0.
Share Capital
$ $
opening Balance -
Closing Balance 2,000 Cash 10,000
7,000 7,000
Share Premium
$ $
opening Balance -
Closing Balance 20,000 Cash 20,000
20,000 20,000
(a)Bonus Issue
Dr. Retained earnings
Cr. Share Capital
Dr. Revaluation Reserve
Cr. Share Capital
Dr. Share premium
Cr. Share Capital
(b) Conversion of Loan to Equity
Dr. Loan
Cr. Share capital
Issue of Share for cash
Dr. cash
Cr. Share Capital
Cr. Share premium
Example:
Following are the extracts of SFP of Cfe Ltd. For the two year ends:
31-Dec-08 31-Dec-09
Assets
- -
Equity & Liabilities
share capital ( 10000 & 30,000 shares of $1 each) 10,000 30,000
Share premium 5,000 10,000
The following additional information is available:
1. On 3/1/2009 CFE issued 1 for 5 shares out of revaluation reserve.
2. on 31/5/2009 CFE issued 3000 shares of $1 each out of share premium account.
3. On 30/8/2009 CFE issued 1000 shares out of retained earnings.
Dr. Loan stock
Cr. Share capital
Cr. Share premium
5. The remaining movement in share capital and share premium account was due to a stock market placement of shares for cash.
Required: Calculate the Financial Inflow from shares issued.
Share Capital
$ $
opening Balance 10,000
Revaluation Reserve(10000*1/5) 2,000
Share premium 3,000
Retaines earning 1,000
6% Loan stock 1,000
Cash (balancing) 13,000
Closing Balance 30,000
30,000 30,000
Share Premium
$ $
Share capital 3,000 opening Balance 5,000
6% Loan Stock 30,000
Closing Balance 10,000 Cash (balancing) 5,000
13,000 13,000
(a) Prepaid Income
Dr. cash 50
Cr. Pre rent Income (liab) 50
On year end/When Service rendered
Dr. Pre rent income (liab) 50
Cr. Rental Income 50
(b) Accrued Income
Dr. Interest Receivable 50
Cr. Accrued Interest Income 50
On receipt
Dr. Bank/Cash 50
Cr. Interest receivable 50
( c ) Pre Payment
Dr. Prepaid rent 50
Cr. Cash 50
When Actually Due
8. Income/Expense/Discount
4. On 31/10/2009 CFE converted $4000 6% Loan stock into 1000 shares of $1 each.
Dr. Rent expense 50
Cr. Prepaid Rent 50
(d) Accrued Expense
Dr. Telephone expense 50
Cr. Accrued Telephone expense 50
When actually paid
Dr. Accrued Telephone Expense 50
Cr. Cash 50
(e) Discount received
Dr. Purchase /Creditor/Payable
Cr. Discount received (income)
Dr. Discount allowed
Cr. Sale/debtor/receivable
$
NBV
4,820
4,180
9,000
30-Sep-00
Illustration # 1
1. PROPERTY ,PLANT AND EQUIPMENT (PPE)
During the year an item of plant that had cost $5000 and had accumulated depreciation of $4000 was sold for cash against a profit of
$2000 .Of this $1000 was still unpaid on 30 sep 2001.
a building was bought on 15th sep 2001 partly paid in cash and remaining payment of $2000 due on 30 nov 2001.
Required: Calculate the cah purchase for purchases of PPE ,cash received from dosposal of fixed assets, depreciation charged to SCI
and profit/loss on disposal.
2. Interest Expense
3. Tax Expense
4. Debentures and Loan Notes
5. Dividend Declared /Proposed/Recommended
6. Interest Income/Investment Income/Dividend Income
7. Share Capital & Premium
On 1st jan 2009 (Date of Incorporation) the compan issued $1 10,000 shares for $3.0.On 31 dec 2009 Company's Share price rose to $7.0.
5. The remaining movement in share capital and share premium account was due to a stock market placement of shares for cash.
8. Income/Expense/Discount