July 1 The company decided that 1,500,000 ordinary shares were to be offered to the public...

July 1 The company decided that 1,500,000 ordinary shares were to be offered to the public at an issue price of $3, payable as follows:

$1.50 on application (due 1 August)

$0.50 on allotment (due 30 August)

$1 on future calls

August 1 Applications had been received for 1,750,000 shares of which applicants for 300,000 shares forwarded the full $3 per share, the remainder paying only the application money.

August 5 At the directors’ meeting it was decided to allot ordinary shares in full to the applicants who paid the full amount and proportionally to all remaining applicants. According to the company’s constitution, all surplus money from application can be transferred to Allotment and Call accounts.

August 30 All outstanding allotment money was received.

November 1 The final call on was made, with payment due by 28 November.

November 28 All money was received on the due date except for the holders of 60,000 shares who failed to meet the call.

Required: Prepare General Journal Entries with narrations and full working out

Expert Solution


	Amount Received On application:
	300000 shares $$3 per share	$900,000
	(1750000-300000) shares @$1.50per share	$2,175,000
	Total amount received on application	$3,075,000
	Number of shares allotted in full	300,000
	Balance number of shares	1,200,000	(1500000-300000)
	Proportion of allottment of balance shares	(1200000/1450000)
	Excess amount to be appropriated to allotment A/C	$375,000	(1450000-1200000)*1.5
Date	Account Title and Explanation	Debit	Credit
August,1,	Bank account	$3,075,000
	Share application account		$3,075,000
	(To record share application money recived)

August,5,	Share application account	$3,075,000
	Share Capital account		$2,250,000	(1500000*1.5)
	Share Allotment account		$525,000	(300000*0.5)+375000
	Share Call account		$300,000	(300000*1)
	(To Record appropriation of application money towards share capital,allotment a/c and Call a/c)
August,5,	Share Allotment account	$750,000		(1500000*0.5)
	Share Capital account		$750,000
	(To Record allotment money due on shares@$0.5 per share

August,30,	Bank Account	$225,000		(750000-525000)
	Share Allotment account		$225,000
	(To record receiept of share allotment money)

November,1,	Share Call Account	$1,500,000		(1500000*1)
	Share CapitalAccount		$1,500,000
	(To record Call money onshares @$1 per sharedue on November 28)

November,28,	Bank Account	$1,140,000
	Calls in arrear account	$60,000		(60000*1)
	Share Call Account		$1,200,000	(1500000-300000)
	(To record receipt of call money )

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