Question
Halloway Brewing had 500,000 ordinary shares of $1 nominal value in issue on January 1, 2026. During 2026:
- Feb 1 — issued 100,000 ordinary shares for cash at $4.50 each.
- Jun 30 — made a 1-for-10 bonus issue (one new share for every ten held), which the directors resolved to capitalise from retained earnings at nominal value.
- Nov 1 — split every $1 share into two shares of $0.50 each.
Required:
- Journal Entries — record any entries required on Feb 1, Jun 30 and Nov 1. Use Cash, Share Capital, Share Premium and Retained Earnings.
- Shares in Issue — the number of ordinary shares in issue at December 31, 2026.
- Effect of the Bonus Issue — the effect of the June 30 bonus issue on the financial statements.
Statements in this challenge
- Journal EntriesJournal Entry
- Shares in IssueNumeric Answer
- Effect of the Bonus IssueStatement Impact
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 and IAS 32 — presentation of equity
Split every share issue between the nominal or par amount and the excess received. The nominal amount goes to share capital and the excess to share premium; these are presented separately and are not interchangeable.
Common mistakes
- Posting the entire proceeds of an issue to share capital and omitting share premium.
- Treating preference shares that carry a mandatory redemption as equity when their substance is a liability.
- Recording share issue costs as an expense rather than against equity.
Further readingPreparing a balance sheet step by step