Unit 1: May 2009, Question#2

​Note 1:
Issue of ordinary shares – 30,000 shares x $5.00 = $150,000
Double entry: Debit          Bank Account    $150,000
                          Credit        Ordinary shares Account    $150,000
​

Note 2:
​Loan interest – 16% x $100,000 = $16,000
Double entry: Debit        Loan Interest expense Account   $16,000
                          Credit      Bank Account    $16,000

Preference dividends – 10% x $80,000 = $8,000.
​Double entry: Debit        Bank Account    $8,000
                          Credit      Dividends paid Account $8,000

Ordinary dividends – 40¢ x{ [$200,000/$5] + 30,000 shares}  = 40¢ x 70,000 shares = $28,000
Double entry: Debit        Dividends paid  $28,000
                          Credit      Bank Account    $28,000
​

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