Problem
Toco Ltd has sought your assistance with recording some transactions it undertook in the financial year to June 30, 2022.
At the start of the financial year, the entity's retained earning balance was $61.3 million, while its share capital, which comprised solely of ordinary shares with a par value of $0.80 each, amounted to $324 million.
At the end of its first quarter, the entity declared and paid dividends of four cents per share. Shortly after this dividend declaration, on December 1, 2022, it undertook a rights issue of two shares for every five held at $1.15 per share. This was followed two months later by a bonus issue of one share for every seven held. The entity's policy in relation to equity restructuring is to preserve retained earnings insofar as is possible.
Task
• Prepare the journal entries for each of the three adjusting equity transactions outlined above, supported with the necessary workings. You are required to show the number of shares in issue before each transaction takes place.