NEWCO PAINTS (PTY) LTD
Ignore Value Added Tax (“VAT”).
Newco Paints (Pty) Ltd (“Newco Paints”) is a private company that sells a variety range of paints
to the public. The company is registered in 2015 and are situated in Potchefstroom. Newco Paints
has a 28 February year end. Assume dividends tax at a rate of 20%.
The company has been registered with the following authorised share capital:
3 000 000 Ordinary shares
1 000 000 5% Preference shares
Note: All the shares are no-par value shares and preference shares are non-cumulative.
Newco Paints (Pty) Ltd
Statement of Financial Position as at 28 February 2019
EQUITY R
1 150 000 Ordinary shares 3 450 000
450 000 5% Preference shares 2 475 000
Retained earnings (2018/03/01) 1 220 000
Profit for the year 260 000
The following transactions have not yet been recorded in the accounting records of Newco
Paints (Pty) Ltd:
1. The board of directors decided on 31 August 2018 to offer 250 000 ordinary shares to the
public at an issue price of R3.50 and 100 000 5% preference shares at an issue price of
R5.50. Underwriters commission of 2.5% are applicable and it is the policy of the company
that commission is set off against retained earnings.
2. During September 2018, applications was received from the public for 310 000 ordinary
shares and 120 000 5% preference shares. On 1 October 2018, all available shares were
issued and excess applications (unsuccessful applicants) were repaid to applicants.
3. On 1 December 2018, land and buildings which have a cost price of R650 000 were
revaluated at R900 000 by a sworn appraiser, Mr J van Zyl.
4. On 1 January 2019, the directors made a capitalisation share issue of 1 ordinary share for
every 10 ordinary shares held. The issue price was R5,70 per share.
5. On 1 February 2019, the board of directors decided to transfer R100 000 to the general
reserve.
6. 30% of all shares of Newco Paints (Pty) Ltd are held by SA companies (legal persons).
7. A final dividend of 10 cents per ordinary share was declared on 28 February 2019. An
interim dividend or R 15 000 was already paid during the year and recorded correctly.
REQUIRED:
1. Prepare the journal entries to record all the above transactions of Newco Paints (Pty) Ltd for
the year ending 28 February 2019.
• Journal narrations are also required
2. Prepare an extract of the statement of financial position of Newco Paints (Pty) Ltd as at
28 February 2019 showing only the equity section.
