Part B On 1 aare 205, Narta Ltd had a balance of $25,.00 in Retained Earnings $1

Question

Part B On 1 aare 205, Narta Ltd had a balance of $25,.00 in Retained Earnings $10,000 in General Reserve and $60,000 in Share Capital account. During the year, the following transactions occurred: The company declared a 10% share dividend (ie, bonus shares) on its 10,000 shares on 2 June 2015. The market price of Narita Ltd shares was $13 per share on 2 June 2015 and this was determined to be the amount at which the dividend shares would be issued. The share dividend was paid (i.e. bonus shares issued) on 31 July 2015. Narita Ltd decided to transfer $5.000 from Retained Earnings to General Reserve on 12 August 2015. Profit after income tax of Narita Ltd for the financial year ending 31 December 2015 was $12,000. REQUIRED: On the basis of above information, prepare the equity section of the Statement of Financial Position of Narita Ltd as at 31 December 2015.

Explanation / Answer

Calculation of changes to retained earnings:

Equity Section:

Opening balance of retained earnings $25000 Add: Profit after income tax 12000 Less: share dividend (13000) transfer to general reserve (5000) Ending balance of retained earnings $19000

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