1. Assignment Chapter 7: Equity (Q1&Q2)
QUESTION 1 (15 MARKS: 27 MINUTES)
Following is the extract of shareholders’ equity component of Malayata Berhad on 31
December 2011.
Ordinary shares- RM5 par value, 100,000 shares authorized,
60,000 shares issued and outstanding RM300,000
Share premium- ordinary shares RM120,000
Retained earnings RM125,000
Total shareholders equity RM545,000
In year 2011, the following transactions affected its shareholders’ equity accounts.
1 January Purchased 12,500 shares of its own share at RM8 cash per share.
31 March Directors declared a 10% of share dividend. The market price of Malayata
Berhad’s share on 31 March is RM9 per share.
13 May Sold 7,500 of its treasury shares at RM9 cash per share.
30 June Sold 5,000 of it treasury shares at RM4.50 cash per share.
15 July Directors declared a RM0.80 per share cash dividend payable on 30
September .
30 September Paid the dividend declared on 15 July.
REQUIRED:
(a) Prepare journal entries to record the above transactions. Omit the explanation.
(8 Marks)
(b) Dividend payment involves three important dates. Identify and explain the importance of
these dates.
(3 Marks)
(c) Give TWO (2) reasons for issuing share dividends.
(2 Marks)
(d) Explain the difference between participating and non-participating preferred shares.
(2 Marks)
