Question

Gundagai Ltd was incorporated on June 30, 2019. On July 1, 2019, the company issued a prospectus offering 300,000 ordinary shares at an issue price of $10, payable on the following terms.

• $3 on application
• $3 on allotment
• $2 on the first call
• $2 on the second call

A summary of the applications and allotments register follows.

Amount paid per share on application	Number of shares applied for	Number of shares allotted
$3.00	200,000	150,000
$6.00	100,000	100,000
$10.00	50,000	50,000

The application process was completed on August 31, 2019, and the shares were allotted to all applicants on September 1, 2019. All money received more than the amounts due on application where applied to amounts due on allotment and calls. Where appropriate, refunds of application money were made. All allotment money was received by September 30, 2019.

  

On November 1, 2020, Gundagai Ltd’s directors made a call of 42c per share, payable by November 30, 2020. By December 31, call money had not been received from holders of 25,000 shares.

Required:

Prepare journal entries to record the above events. No Post Ref required. Refer to the provided Chart of Accounts for the appropriate account names.

Date	Account	Post Ref	Debit	Credit
2019
	To record application money received
	To record the issue of shares on allotment
	To record the transfer of cash received on allotment
	To record transfer to allotment and calls in advance of the excess application money
	To record receipt of allotment monies
2020
	To record the first call of ordinary shares
	To record the transfer of calls in advance money
	To record receipt of first call monies.

Answer 1

As given in the question, following information is briefly stated, corresponding journal entries are made along with the explanations wherever required.

Total Applications Received - 3,50,000 shares

Total Allotment Made - 3,00,000 shares

• $3 on application
• $3 on allotment
• $2 on the first call
• $2 on the second call

Date 2019	Particulars	Debit Amount	Credit Amount
July 1	Bank A/c Dr.	10,50,000
	To Share Equity share application A/c		10,50,000
	(Being share application money received on 350,000 shares @ 3 per share)
August 31	Equity Share Application A/c Dr.	10,50,000
	To Equity Share Capital A/c		9,00,000
	To Equity Share Allotment A/c		1,50,000
	(Being the application money transferred to share capital of 3,00,000 shares @ 3 and the balance amount transferred to allotnent account)
Sep 1	Equity Share Allotment A/c Dr.	9,00,000
	To Equity Share Capital A/c		9,00,000
	(Being the allotment money transferred to share capital on 3,00,000 shares @3 )
Sep 30	Bank A/c Dr.	7,50,000
	Calls-in-advane Dr.	1,50,000
	To Equity Share Alolotment A/c		9,00,000
	(Being share allotment money received and the amount receioved with application amount adjusted in allotment)
Nov 1	Equity Share 1st Call A/c Dr.	6,00,000
	To Equity Share Capital A/c		6,00,000
	(Being the equity share 1st call made due on 3,00,000 shares @ 2)
	Bank A/c Dr.	5,50,000
	Calls-in-arrear A/c Dr.	50,000
	To Equity Share 1st Call A/c		6,00,000
	(Being the amount received on 1st call except on 25,000 shares @ 2 each. transferred to calls-in-arrear A/c)
Nov 1	Equity Share Second Call A/c Dr.	600,000
	To Equity Share Capital A/c		6,00,000
	(Being the equity share second call made due on 3,00,000 shares @ 2)
	Bank A/c Dr.	5,50,000
	Call-in-arrear A/c Dr.	50,000
	To Equity Share Second Call A/c		6,00,000
	Being the amount received on second call except on 25,000 shares @ 2 each. transferred to calls-in-arrear A/c)