ACCY112 Autumn 2015 Assignment Question 4 Week 11

QUESTION 1
On 1 January 2014 Italy Ltd was registered as a public company that use 31
December as the end of the financial year. On 5 January 2014, a prospectus
was issued inviting applications for 300,000 shares at a price of $4 per share
on the following terms:
$2 on application,
$1 on allotment,
50 cents on call one,
balance on call two,
Call one was made three months after the date of allotment, and call two was
made six months after the date of allotment.
By 31 January 2014, applications were received for 380,000 shares of which
applicants for 40,000 shares forwarded the full $4 per share. On 7 February
2014, at the directors meeting it was decided:
To allot ordinary shares in full to applications who had paid in full on
application
To allot the remaining shares to the applicants on a pro rata basis.
The surplus application money was offset against the amount payable
on allotment.
The balance of the allotment money was received by 15 February 2014.
$15,000 of share issue cost was paid on 31 February 2014.
The two calls were made on the dates stated in the prospectus, and a month
after, each call monies were received, except that the holders of 15,000
shares did not pay call two.

Required:
a) Prepare entries in general journal form to record the above transactions
(show you workings)
b) Prepare a Statement of Shareholders Equity for Italy Ltd as at 31
December 2014.

1



QUESTION 2
The listing of the ledger accounts (unadjusted) of Cooper Manufacturing
Limited at 30 September 2014 is presented below.
Account Name

Balance ($)

Sales

6,000,000

Prepaid insurance

48,000

Factory Rent

152,000

Office salaries

690,000

Direct Labour

1,300,000

Raw Materials Purchases

1,572,000

Factory Supplies

64,000

Finished Goods-1 October 2013

500,000

Work in Process-1 October 2013

246,000

Raw Materials- 1 October 2013

150,000

Plant energy costs

148,000

Indirect Labour

116,000

Selling & Distribution Expenses

170,000

Interest and other operating expenses

150,000

Machinery and equipment

535,000

Accumulated depreciation-Machinery and equipment

200,000

The following additional information is available:
1. The inventories as at 30 September 2014 were:
Raw materials

$112,000

Work in process

$261,000

Finished goods

$440,000
2

2. On 1 July 2014 the company paid $48,000 for 12 months insurance
cover on the factory. Prepaid insurance was debited at the time of the
transaction.
3. Office salaries of $10,000 are unpaid at 30 September 2014.
4. The Machinery and Equipment account comprises $320,000 of factory
machinery and the balance for office equipment. All machinery and
equipment are depreciated using the straight line method over a 5 year
life with a residual value of $20,000 for Machinery and $15,000 for
Office equipment. There were no machinery and equipment acquisitions
or disposals during 2013-2014.

Required:
a) Prepare the Costs of Goods Manufactured statement for the year ended 30
September 2014.
b) Prepare an income statement for the year ended 30 September 2014.