REQUIREMENTS FOR ASSIGNMENT
- You are presented with equity information together with five separate events for Fairweather Manufacturing Ltd (FML) that give rise to transaction/s. Prepare all the general journal entries that arise for the period 1st July 20X3 to 30th June 20X4 only. You also need to provide supporting information (ie a working paper) for each journal entry. Furthermore after each of the five events provide the following:
- ?The number of ordinary shares on issue subject to the dividend reinvestment plan.
- ?The number of ordinary shares on issue which are not subject to the dividend reinvestment plan.
- ?The total number of ordinary shares on issue.
- Prepare general ledger T account for Ordinary Share Capital for the period 1/7/20X3 to 1/7/20X4. Ensure it is properly balanced at 30/6/20X4.
Fairweather Manufacturing Led (FML) is a public company and was incorporated a number of years ago and has been very successful. The equity section of the balance sheet of the company at the 30" June 20X3 is provided below: OWNERS' EQUITY $ Issued Capital 42,500,000 Reserves 12,245,000 Retained profits 3,276,500 TOTAL OWNERS' EQUITY 58,021,500 The company's financial year ends on 30th June. Additional Information: 1. Issued capital is comprised of: . 3,125,000 ordinary shares all issued at $8.00 each . $17,500,000 of 2.5%pa preference shares. Dividends on these shares are paid six monthly on the first day of October and April each year. 2. Reserves is comprised of: . General Reserve of $7,630,000 . Asset Revaluation Reserve of $4,615,000 A list of ordinary shareholders and their holdings as at 30th June 20X3 is provided on the next page. Note: DRP = "Y" elected to be in the dividend reinvestment plan The amounts under 1/7/20X3 = number of shares held at that date (Ensure that you have fully read and understood the information previously provided under the Basic Details for the assignment.)Family name/Corporate name First Name DRP 1/7/20X3 Adkins Darin 78,500 Andrews Lee Y 34,000 Ball Superannuateon Fund 78,900 Ballard Jeffrey Y 25,600 Barnett Jean 97,500 Castro Investment Pty Ltd 100,000 Crawford Israel 23,400 Erickson Karl 55,500 Foster Isaac Y 12,500 Francis Gordon Y 38,700 French Enterprise Ltd 280,700 Gonzalez International Ltd 65,000 Grant Alfonso 32,900 Gray Abel Y 11,200 Griffin William 22,000 Hale & Doug Pty Itd 65,500 Holmes May Y 121,100 Holt Harriet Y 54,000 Jensen Oriental Ltd 58,000 Jordan Dianne 87,200 Mann Sherman 22,500 Mason Leonard 8,000 Meyer Minnie Y 43,600 Montgomery Cornelius 58,200 Morrison Candace 69,100 Nea Faith Y 71,800 Norton Archie 85,300 Ossie Trading Ltd 325,000 Perry Ernestine 36,400 Potter Practice investments Ltd 143,600 Reid Lana Y 59,000 Salazar Trust v 248,000 Silva Alexandra 65,400 Stephens Superannuateon Fund 190,000 Stevenson Jake 28,000 Stone Glenda 45,200 Sutton Willie 62,500 Thompson Andrew 11,900 Todd Sara 22,200 Underwood Pty Ltd Y 127,100Shareholders who elected to participate in the dividend reinvestment plan introduced by FML receive ordinary shares in lieu of cash for dividends. Shareholders must agree that their entire holding is subject to the DRP plan. Shares are issued at 96% of the closing ASX share price on the day in which the dividend is declared. It is likely that a calculation of the number of shares under the DRP plan will result in a part share (ie not a whole number). In that event the number of shares will be rounded down to the next whole number. For example, a calculation which results in 12,345.78 shares will be rounded down to 12,345. That is, that part of the share is lost. Whenever the rounding occurs that rounded down number will become the new shareholding as the basis for future transactions and calculations. Other rounding conditions are: . The principle of rounding down the number of shares (as in the DRP above) applies to any share issue. . Also note that care needs to be taken with some calculations. When calculating dollar amounts for dividends etc you need to do these on individual shareholders and then aggregate those numbers for the journal entry. . Calculations which involve share prices, should be rounded to the nearest cent (ie 2 decimal places of a dollar). Journal entries should be rounded to the nearest whole dollar. The following are five events that relate to the 20X3/X4 financial year for Fairweather Manufacturing Ltd (FML). 1. On the 22" June 20X3 the company determined a final dividend of 4.0 cents per ordinary share. This was declared on the 14" July 20X3 and paid three (3) days after the annual general meeting which was held on the 28th September 20X3. 2. On the 12" November 20X3 FML announced a bonus ordinary share issue of 1:15 at an issue price of $12.00/share. The bonus issue is to be paid out of the General Reserve and was made on the 30" November 20X3. 3. On the 2" January 20X4 FML declared and paid an interim dividend of 2.5 cents per ordinary share.4. The FML Board of Directors had been working on the acquisition of a rival business and on the 16" January 20X4 received advice of acceptance of a purchase price. To help fund the acquisition FML decided to raise some capital through a rights issue of ordinary shares. They formalised the rights issue at their meeting on the 28" January 20X4 where they decided to offer ordinary shareholders the rights issue on a 1:12 basis. Shareholders who accept the offer pay 85%% of the share price on the day of the Board decision. Acceptance and payment by shareholders needs to be made on the 18" February 20X4. The amount paid is based on the rounded down number of shares issued. The following shareholders took up the offer and paid the appropriate amounts on the required date: Family name/Corporate name First Name Adkins Darin Andrews Lee Ball Superannuateon Fund Barnett Jean Castro Investment Pty Ltd Crawford Israel Erickson Karl Foster Isaac Francis Gordon French Enterprise Ltd Grant Alfonso Gray Abel Griffin William Hale & Doug Pty Itd Mann Sherman Mason Leonard Meyer Minnie Norton Archie Ossie Trading Ltd Perry Ernestine Potter Practice investments Ltd Reid Lana Salazar Trust Silva Alexandra Stephens Superannuateon Fund Sutton Willie Todd Sara Underwood Pty Ltd5. The 20X3/X4 financial year was exceptional for FML and it decided to reward its ordinary shareholders. At the Directors meeting on the 13" June 20X4 it decided to provide a twofold benefit. First, is a bonus share issue on a 1:25 basis issued at $12.50 per share and funded from excess amounts in the Asset Revaluation Reserve. Second, is that the meeting determined a final dividend of 5.0 cents per ordinary share which is hoped to be declared sometime in July 20X4. The following are a selection of ASX closing daily share prices for FML Date Closing Share Price $ Date Closing Share Price $ 6/6/X3 $12.46 14/12/X3 $12.14 15/6/X3 $12.55 2/1/X4 $12.12 22/6/X3 $12.54 18/1/X4 $12 26 5/7/X3 $12.39 28/1/X4 $12.45 14/7/X3 $12.50 12/2/X4 $12.51 12/8/X3 $12.46 18/2/X4 $12.60 31/8/X3 $12.51 30/3/X4 $12.63 12/9/X3 $12.60 12/4/X4 $12.59 28/9/X3 $12.62 29/4/X4 $12.52 1/10/X3 $12.58 12/5/X4 $12.56 11/10/X3 $12.51 31/5/X4 $12.55 2/11/X $12.30 8/6/X4 $12.59 30/11/X3 $12.06 13/6/X4 $12.83 4/12/X3 $12.07 30/6/X4 $12 88
