Answer to Question #303580 in Accounting for Ruby

Question

Analyse each of soldiers statement and indicate to him the effect on the accounting equation.

1.Paid R48 000 to SARS as a second provisional tax payment

2. Bought back 70 000 shares from the deceased estate of a shareholder at 65 cents per share above the average share price

3.A final dividend of 14 cents per share was declared on the 1 140 000 issued shares on 28 February 2021

4. The directors fees of two members earning R300 000 each are outstanding at the end of the accounting period

Answer 1

1. Transaction will have no effect on the accounting equations because the liability has not been incurred.

2. Purchase above fair value will lead to good will of R42,000 which is an asset, investment asset of R70,000, and decrease cash asset by R70,000, consequently, equity will increase by R42,000.

3. No effect since declaration has not taken effect.

4. Fees payable will increase by R600,000 and this will increase Liabilities by same amount.