Blaze Ltd has decided to purchase shares with a nominal value of £110,000 (originally issuedfor £120,000) for £140,000. The purchase is to be funded out of distributable profits.The statement of financial position of Blaze Ltd immediately prior to the purchase of theshares is as follows:£Net assets950,000Share capital (£1 shares)Share premium500,000250,000Retained earnings200,000Required(a)(b)Prepare journal entries to give effect to the above transaction.Prepare the statement of financial position of Blaze Ltd immediately after thepurchase.(c)Comment on the capitalisation of capital and revenue reserve of Blaze Ltd afterthe repurchase of its shares.

Treasury stock is acknowledged as the reacquired stock of a corporation which were outstanding in…

Blaze Ltd has decided to purchase shares with a nominal value of £110,000 (originally issued for £120,000) for £140,000. The purchase is to be funded out of distributable profits. The statement of financial position of Blaze Ltd immediately prior to the purchase of the shares is as follows: £ Net assets 950,000 Share capital (£1 shares) 500,000 Share premium Retained earnings 250,000 200,000 Required (a) (b) Prepare journal entries to give effect to the above transaction. Prepare the statement of financial position of Blaze Ltd immediately after the purchase. (c) Comment on the capitalisation of capital and revenue reserve of Blaze Ltd after the repurchase of its shares.

Blaze Ltd has decided to purchase shares with a nominal value of £110,000 (originally issued for £120,000) for £140,000. The purchase is to be funded out of distributable profits. The statement of financial position of Blaze Ltd immediately prior to the purchase of the shares is as follows: £ Net assets 950,000 Share capital (£1 shares) 500,000 Share premium Retained earnings 250,000 200,000 Required (a) (b) Prepare journal entries to give effect to the above transaction. Prepare the statement of financial position of Blaze Ltd immediately after the purchase. (c) Comment on the capitalisation of capital and revenue reserve of Blaze Ltd after the repurchase of its shares.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The following is an extract from the trial balance of Tempo Ltd on 30 June 2022: Land and buildings 114000Equipment 210000Investment (80 000 shares of £1 each in Rhythm Ltd at cost price) 650000 Inventory (30/6/2008 - £382 000) 418000Trade receivables (30/6/2021 – £180 000) 206000Cash and cash equivalents 92000 Share capital: Ordinary share capital including premium 450000Preference share capital 200000 Retained earnings: Balance – beginning of year…
On 1 January 2020 Harleen Inc purchased 1,275 ordinary shares in Shresta Inc , paying £5,300 by cheque. At the time of purchase, Shresta Inc’s profit and loss account balance were £1,000 and share premium was £500. The following are the statement of financial positions of Harleen Inc and Shresta Inc: Statement of Financial Position as at 31 December 2020 Harleen Inc Shresta Inc Non-Current Assets £ £ £ £ Buildings 10 000 4000 Motor Vehicles 7000 900 Investment in Shresta Inc 5300 22300 4900 Current Assets Inventory 1200 800 Trade Receivables 1500 260 Bank 300 390 Cash 50 10 3050 1460 Current Liabilities Trade Payables 5600 800 (2550) 660 19750 5560 Non-Current Liabilities Loans 6000…
On 1st January 2021, TNT Plc bought 27,000,000 ordinary shares of the shares of RWT Ltd. At this date. Statements of Financial Position as at 31 December 2021: TNT Plc RWT Ltd £000 £000 Non-Current Assets Property, Plant and Equipment at NBV 196,875 90,000 Investments in RWT Ltd 18,375 215,250 90,000 Current Assets 56,625 24,000 Total assets 271,875 114,000 Current Liabilities 43,890 15,000 Long Term Loans 105,000 30,000 Total Liabilities 148,890 45,000 Equity Share Capital (£0.4 share) 30,000 45,000 Share Premium 45,000 15,000 Retained Earnings 47,985 9,000 Total equity 122,985 69,000 Total Liabilities and equity 271,875 114,000 You are also given the following information: 1. The fair values of the non-current assets of RWT Ltd at 1 January 2021 were £99,000,000 as compared with their book value of £99,000,000. 2. RWT’s retained earnings at 1 January 2021 were £6,000,000. Required Calculate total non-current…
(a) On 1 January 2023, the LW Group purchased 90% of the 3.75m £1 equity share capital of JL Ltd. The costs incurred by LW Group at the date of acquisition were as follows: Cash paid on 1 January 2023 Professional fees Bank fees and charges associated with the acquisition £'000 124,800 850 1,000 In addition to the costs shown above, LW issued 15,000,000 25p ordinary shares to the shareholders of JL Ltd as part of the consideration. As at 1 January 2023 the market value of LW shares were £1.50 each and JL Ltd shares were valued at £1.20 each. LW will also pay a further £5,000,000 in cash on 1 January 2024. An appropriate discount rate is 7%. A further 2,000,000 shares will be issued by LW to the shareholders of JL Ltd on 1 January 2024 if profits increase by 5% over the next 12 months. The directors believe there is a 60% likelihood of the contingent consideration being achieved and that the market value of LW shares are expected to rise to £1.80 each. A due diligence report indicates…
Seleco Bhd acquired 800,000 ordinary shares, 90,000 preference shares and 120,000 debentures of Marco Bhd on 1 January 2020 a cost of RM1,200,000, RM90,000 and RM120,000 respectively by cash. On the date of acquisition, the balance of Marco Bhd equity and liabilities comprise the following: Ordinary share capital Preference share capital RM1,000,000 (1,000,000 units) RM200,000 (200,000 units) RM200,000 (200,000 units) RM200,000 Rm100,000 Debentures Retained profit General reserve On the same day a property was revalued at RM40,000 more than its carrying value. Non-controlling interest was valued based on proportion of fair value of net asset of Marco on the date of acquisition. Required: a. Compute goodwill / bargain purchase. b. Determine the consolidation journal entries to record the above acquisition for preference shares and debentures.
The following information relates to Midas Ltd, a small but successful investment holdingcompany.(i) In April 2021, Midas Ltd purchased 100,000 £1.00 listed equity shares at a price of £5.00per share. Transactions costs were £5,000. At 31 December 2021, these shares weretrading at £5.30 per share. A dividend of £0.05 per share was received on 30 September2022.(ii) Midas Ltd also has an investment in a five-year bond which was purchased four yearsago.At 31 December 2021, the bond was valued at an amortised cost of £500,000 with a statedand effective interest rate of 8% (current market rates are 10%).This bond will be maturing on 31 December 2022 and Midas Ltd is expecting to receive only80% the principal but not the interest for the last year. Required(a) Show the figures relating to this investment to be included in Midas Ltd's financialstatements at 31 December 2021 on the basis that:(i) The shares were bought for trading(ii) The shares were bought as a source of dividend income and…
On 30 June 2020 Pink Ltd acquired all assets (except for cash) and assumed all liabilities (except for debentures) of Purple Ltd. At this date, the carrying amounts of assets and liabilities of Purple Ltd were at fair value and consisted of: $15,000 32,000 40,000 Cash Accounts payable $9,000 Accounts receivable Debentures (10%) Share capital ($2 shares) Retained earnings 40,000 Inventory 110,000 Shares in listed companies 90,000 48,000 Motor Vehicle 45,000 Accumulated depreciation (15,000) In exchange for these net assets, Pink Ltd agreed to: issue two (2) Pink Ltd shares for every five (5) shares in Purple Ltd. On 30 June 2020 Pink Ltd shares were valued at $5.50 provide sufficient additional cash in order for Purple Ltd to pay out the debentures (including interest) and liquidation costs of $3,500. Required: Prepare an acquisition analysis for Pink Ltd's acquisition of Purple Ltd. wwww
Alpha Ltd acquired 30% of the voting shares of Beta Ltd on 1 July 2021 for $150 000. This acquisition resulted in Alpha Ltd having significant influence over Beta Ltd. At the date of acquisition, the shareholder’s equity of Beta is as follows: Share capital 350 000 Retained profits 50 000 400 000 The following information relates to Beta Ltd as at 30 June 2022, the end of financial year FY2022: Profit for FY2022 90 000 Dividend paid out of the profit of FY2022 50 000 Asset revaluation reserve 25 000 Additional information: Mu Ltd is 100% owned by Alpha Ltd and is Alpha’s subsidiary. During FY2022, Beta sold $100 000 of inventories to Mu Ltd and made profit of $40 000. As at 30 June 2022, 20% of the inventories were still held by Mu Ltd. Required: a) Prepare journal entries for Alpha Ltd in FY2022 to account for its investment in Beta Ltd using the Equity Method. Use the Reclassification Method to account for the profit and…
9. Tiger acquired 20% share capital of Deer on 1 August 2021 at the cost of £5.5million. Tiger has classified Deer as an associate undertaking. For the year ended 31 October 2021, Deer has reported a net profit of £937,500. What is the value of the associate investment in the group statement of financial position of Tiger as at 31 October 2021? A. £5,546,875 B. £6,125,000 C. £5,968,750 D. £5,500,000 10. Hyperverse plc acquired 80% of the share capital of Lyca plc on 1/10/2018 for £340,600. The profit for the year ended 31/12/2018 for Lyca was £36,000. Profits are deemed to accrue evenly over the year. At 31/12/2018 the following extracts of the statement of financial position for Lyca has been provided: Equity share capital Retained earnings What is the goodwill on acquisition? A. £150,000 B. £184,650 C. £159,000 D. £177,000 £200,000 £180,000
On 3 September 2020, Debussy Ltd purchase 40,000 $1 listed equity shares of Red Copper Ltd at a price of $3 per share. Transaction costs were $5,000. At the year end of 31 December 2020, these shares were trading at $3.50. Debussy Ltd holds an active trading portfolio and the shares in Red Copper Ltd are acquired principally for the purpose of short-term profit. Required: Provide the accounting entries to account for initial and subsequent measurement of the share investment in Red Copper Ltd, in accordance with IFRS 9 / AASB 9 Financial Instruments. (narrations are not required). ANSWER HERE: Date Account Name Debit Credit
Dwani Ltd acquired all the issued shares (cum div.) of Power Ltd for $653 000 on 1 January 2022. At that date, the equity of Power Ltd was recorded as follows. Share capital $ 400 000 General reserve 88 000 Retained earnings 90 000 On 1 January 2022, the records of Power Ltd showed that the company had previously recorded a goodwill at cost of $15 000. Further, Power Ltd had a dividend payable of $25 000, the dividend to be paid in March 2022. All other assets and liabilities were carried at amounts equal to their fair values at the acquisition date, except some inventories recorded at $20 000 below their fair value. Also, Dwani ltd identified at the acquisition date a patent with a fair value of $45 000 that Power Ltd has not recorded in its own accounts. Required Prepare the acquisition analysis on 1 January 2022. Prepare the consolidation worksheet entries for Dwani Ltd’s group on 1 January 2022.…
Brick Ltd acquired 80% of the shares in Mortar Ltd on 1 January 2019 for an initial consideration of £39,000,000 cash and a further £13,000,000 will be paid on 1 January 2021. On 1 January 2019, Mortar Ltd had retained earnings of £7,800,000 and the market price of its shares was £1.50 per share. The Statement of Financial Position of Brick Ltd and its subsidiary Mortar Ltd as at 31 December 2019 are as follows: Brick Ltd £000 Mortar Ltd £000 Non-current Assets: Property, plant and equipment at cost 65,000 52,000 Investment in Mortar Ltd 50,791 115,791 52,000 Current Assets: Inventories 3,900 10,400 Trade receivables: Brick Ltd 13,000 Other 20,800 9,100 Cash 2.600 27.300 32,500 84,500 Total Assets 143.091 Equity and Liabilities Еquity Ördinary Share Capital at £1 each 58,500 32,500 Revaluation Reserve 15,600 6,500 Retained earnings 33,210 107,310 36.400 75,400 Liabilities Non-Current Liabilities: Deferred consideration for Investment in Mortar Ltd. 12,381 Current Liabilities: 10,400…