Economics, Accounting & Business: Post your doubts here!

[WaleedUQ]

WaleedUQ

the share premium can only be debited with the amount lowest in this rule:

1) Share premium received on original issue ( the premium received on the shares that are being redeemed at the time of issuance )
2) Existing Share premium balance sheet value + share premium received on new issue
3) Total cash received on new issue

This is a RULE. now if any value is the lowest in the above 3 rules, that is the amount we can charge to the share premium but if any1 is 0, as 0 is the lowest value, which means we cannot charge anything to the share premium account and we will have to use Profit and loss account. coming to example 4 that is the problem, we are not told that if these shares or ordinary shares were issued on premium ( it is wrong also as Capital Redemption Reserve is to be created of $85,000 not $100,000 ), so we will consider the first rule "Share premium received on original issue" as it is 0, 0 being the lowest value, we cannot debit share premium account and will use Profit and Loss account. even-though, new shares are being issued, we can see the option 2 and 3 too, but there values are bigger than 0, so we will not consider them.

For people who dont know how to create Capital Redemption Reserve:

here, the treatment is quiet easy. if new share are being issued with premium then just subtract the nominal (par value) of shares being redeemed with the total cash received from issuance of new shares. the difference is the capital redemption reserve balance.

eg: preference shares of $200,000 are being redeemed, with a premium of $20,000 and new issuance is being made to finance the redemption of $100,000 with $25,000 premium. here the amount we will charge in the capital redemption reserve is :

Nominal value of preference shares being redeemed - total cash received on new issue = Capital Redemption Reserve
$200,0000 - ( $100,000 + $25,000 ) = $75,000 Capital Redemption Reserve will be created

if the new issuance of shares are not being made, we will create the Capital Redemption Reserve same as the Par value of Redeemed shares

eg. Consider the example above but now think that we are not issuing any shares just redeeming preference shares of $200,000 so the capital redemption reserve created will be $200,000

You're just making it complicated waji.
You are talking about redemption of shares and when to charge share premium?
See the image below and make your life easy

 

[WaleedUQ]

say what?? 2002? I thought it was more like 2010-2011 ...well thanks anyways man... the rule WaleedUQ posted is more like "Premium on redemption of shares can only be charged to Share Premium a/c when both, they were originally issued at a premium higher than the premium at redemption & the redemption is being financed fully/partially by issue of new shares at premium.", but the difference is that according to the chart, the originally issued premium doesn't have to be higher than the premium on new issue...

hey is it from some book or notes by some teacher? If it is from a book, it is a new edition one right?
Thanks

No the premium can be higher to
for example
they were originally issued at a premium of 0.1
and redeemed at a premium of 0.3
so we'll debit the whole premium from S.P account
Secondly, My college teacher gave it to me this year
He gave me a bunch of very difficult questions of dissolution, budgets, process costing, almost of every topic.
For exp.
Cash flow question that i posted, it was easy but still it was tricky
Do you know how to deal with
A partnership manufacturing account or a company manufacturing account ?
Do you know how to deal with WIP opening ??
I know

 

[kamidada]

yes mate and this is the method used in 2002 oct/nov p4 paper as i have the markscheme of that paper.

rules:

1) $80,000
2) $80,000 + $69,000
3) $69000

and if it says reserves in the flexible form, this method already considers this point as it tells us how much premium we can charge so that the reserves remain the most flexible form

AS WAJIMAN HAS QUOTED IT IS ALSO GIVEN IN H RANDALL's BLACK BOOK IN THE CHAPTER FOR CAPITAL REDEMPTION, REDUCTION AND RECONSTRUCTION BUT WITH A LITTLE DIFFERENCE. PL CHK IT TOO

 

[WaleedUQ]

Yeah I meant that according to your chart it doesn't matter if it is higher or lower...& no I have never heard of a Partnership or Company Manufacturing account, but yeah I have done questions involving WIP opening...

I have few questions, scan karke i will post them !

 

[reina81]

In the syllabus under the investment appraisal there is something called "Ascertainment of future net cash flows" is this the same as IRR?

 

[Saad Ghori]

yes mate and this is the method used in 2002 oct/nov p4 paper as i have the markscheme of that paper.

rules:

1) $80,000
2) $80,000 + $69,000
3) $69000

and if it says reserves in the flexible form, this method already considers this point as it tells us how much premium we can charge so that the reserves remain the most flexible form

Dude whats the name of your teacher? Your from Lahore right?

 

[wajiman]

Dude whats the name of your teacher? Your from Lahore right?

Sir Waseem Zia

 

[youzair]

multiplier= 1 / 1-mpc(1-t)
= 1/ 1-(5/6 * 0.6)
=2
so A is the correct answer

Multiplier= 1/(mps+mrt+mpm) or 1/leakages
the question says its closed eco wid no gov intervention so Multiplier shud b 1/MPS or 1/(1-MPC).
when there is no gov intervention then means there is no taxes so why u multiplying MPC to Disposable Income?

 

[Saad Ghori]

Sir Waseem Zia

So your in UCL?

 

[wajiman]

So your in UCL?

yes

 

[Saad Ghori]

yes

Oh cool my centres UCL

 

[Manesh]

Multiplier= 1/(mps+mrt+mpm) or 1/leakages
the question says its closed eco wid no gov intervention so Multiplier shud b 1/MPS or 1/(1-MPC).
when there is no gov intervention then means there is no taxes so why u multiplying MPC to Disposable Income?

closed economy does not mean that there is no government
Closed economy means there is no trade between countries.

 

[youzair]

closed economy does not mean that there is no government
Closed economy means there is no trade between countries.

but two sector economy is also closed economy in which only C and I exist no G...
that confused me in mcqs!
please help me out.
There are 3sectors through which eco work.s
2 sectors= C+I - closed eco
3 sectors= C+I+G - closed eco
4 sectors= C+I+G(X-M) - open eco

 

[Manesh]

but two sector economy is also closed economy in which only C and I exist no G...
that confused me in mcqs!
please help me out.
There are 3sectors through which eco work.s
2 sectors= C+I - closed eco
3 sectors= C+I+G - closed eco
4 sectors= C+I+G(X-M) - open eco

all you have written is correct
2 sector= C+I (closed eco with no govt)

 

[youzair]

all you have written is correct
2 sector= C+I (closed eco with no govt)

I know this is correct but dude my doubt doesnt end here, the question states that there is no govt intervention then why you deducted TAX from the Y? :/ indeed ur ans is correct :O

 

[Manesh]

I know this is correct but dude my doubt doesnt end here, the question states that there is no govt intervention then why you deducted TAX from the Y? :/ indeed ur ans is correct :O

my friend where it is stated that there is no govt. intervention,
the question only says that in a closed economy
read the question carefully.

 

[redapple20]

SOMEONE PLZ HELP! may 04 p4 Q2 ersatz ltd accounts!

 

[redapple20]

Do u have its solution? In part b the value of transferred goods is taken not on 10000 units but 9500! Why? Wen from procees 1 10000 units were passed frwrd?

 

[redapple20]

? :/

 

[redapple20]

Lol frgt it so tel me in a budgeted statement on actual production we wil only take the number o units the Q asks for regardless of work in progress?