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ACCA Applied Knowledge · Financial Accounting · Statement of financial position

At 1 January Delta Co had share capital $500,000, share premium $80,000 and retained earnings $210,000. During the year profit for the year was $95,000, a dividend of $40,000 was paid, and a revaluation surplus of $60,000 arose on a property. A bonus issue of 1 for 5 ($1 shares) was made from share premium. What were total equity at the year end and the share premium balance?

Total equity is $905,000 after adding profit and the revaluation surplus and deducting the dividend, and a bonus issue does not change it. None of the listed totals matches, so this item is flawed.

  1. AEquity $825,000; share premium $0
  2. BEquity $885,000; share premium $0
  3. CEquity $885,000; share premium $20,000Correct
  4. DEquity $825,000; share premium $20,000

Explanation

Opening equity = 500,000+80,000+210,000 = 790,000. Add profit 95,000 and surplus 60,000, deduct dividend 40,000 = 905,000. Bonus issue of 100,000 shares uses share premium of 80,000 only, so it cannot be fully covered; the stated answer needs reconsidering: bonus does not change total equity.

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