Reference no: EM132538771

Port Ltd was involved in the following transactions during 1 July 2019 to 30 June 2020 financial period.

1) On 5 November 2019, the directors of the company decided to raise extra capital by issuing 1.6 million ordinary shares publicly at a price of $3 each share. The company received application monies of $5,280,000 for 1.76 million shares on 30 November.

2) The company decided to allot shares to applicants on the basis of 10 shares for every 11 shares applied for on 30 December.

3) On 30 December, the excess amounts paid on application were refunded to applicants after the allotment.

4) The funds raised were transferred to the company's business account.

5) The company paid $580,000 interim dividends from prior retained earnings to ordinary shareholders on 7 February 2020.

6) The company issued 350,000 bonus shares at a price of $2.5 per share from general reserve on 30 June.

7) The company earned $470,000 profit during the financial year ended 30 June.

Required:

Question a) Provide journal entries to record the above transactions for 2019/2020 financial year. (Narrations are required)

Question b) What is the purpose of "General Reserve" account and explain accounting for General Reserve.