Answer to Question #153880 in Accounting for nhlaphu

Question

BB (Pty) Ltd is a company in the Capricorn district. The company is in the business of manufacturing clothes. The company has a financial reporting period of 28 February. Currently the company is preparing the financial statements for the period ending 28 February 2019.

Scenario A

On 1 June 2018 BB (Pty) Ltd purchased 6 000 000 (60% interest) of the issued ordinary shares in Brexit (Pty) Ltd for R8 000 000. Brexit (Pty) Ltd on 1 February 2019 declared dividends amounting to R10 000 000 payable to the shareholders registered on this date. On the 18^th of February 2019 Brexit paid out the dividend payable. There was no change in the issued share capital since 1 June 2018 in Brexit (Pty) Ltd.

REQUIRED

Provide the journal entries to record the transactions above. 

Answer 1

Shares purchased:

Debit financial investments Credit calculations with Brexit (Pty) Ltd - R8 000 000

Accrued dividends:

Debit settlements with Brexit (Pty) Ltd Credit other income and expenses - R10 000 000 

Received dividends:

Debit settlement account Credit settlements with Brexit (Pty) Ltd - R10 000 000