Question

February 8    As provided for in the constitution, the ordinary shares on which the call was unpaid were forfeited. The constitution in relation to this class of shares further provided for any surplus on resale, after satisfaction of unpaid calls and associated costs, to be returned to the former shareholders.

100,000 “A” ordinary shares, issued at $2, called to $1.80	$ 180,000
Less: Calls in Arrears - “A” ordinary shares	$ (3,500)
120,000 “B” ordinary shares, issued at $1.50, called to $1	$ 120,000
250,000 5% preference shares, issued at $1, paid to $0.50	$ 125,000
100,000 $1 options	$ 100,000
General reserve	$ 250,000
Retained earnings “A” ordinary shares - payable as follows:	$ 600,000

$0.80 on application

$0.50 on allotment

$0.50 on 1st call

$0.20 on future calls

“B” ordinary shares - payable as follows:

$0.50 on application

$0.50 on allotment

$0.50 on future calls

February 20 The forfeited shares were re-issued to Melbourne Investments Ltd, as paid to $1.80 per share for $1.40 cash per share. Share issue cost amounted to $800.

February 21 The balance from forfeiture was returned to the former shareholders.

Required: Prepare general journal entries with working out and narrations

Answer 1

Particulars			Debit	Credit
“A” ordinary shares
Bank A/c …Dr.			80,000
To Share Application A/c				80,000
(Being the application money received @ $ 0.80 on 100,000 shares)
Share Application A/c … Dr.			80,000
To Share Capital A/c				80,000
(No. of Shares allotted x application money per shares)
(Being the application money on 100,000 shares @ $0.80 per share transferred to share capital account)
Share Allotment A/c Dr.			50,000
To Share Capital A/c				50,000
(No. of Shares allotted x allotment money per share)
(Being the Allotment money on 100,000 shares @ $0.50 per share called)
Bank A/c …Dr.			50,000
To Share Allotment A/c				50,000
(Being the allotment money received @ $ 0.50 on 100,000 shares)
Share Ist Call A/c Dr.			50,000
To Share Capital A/c				50,000
(Being the Ist Call money on 100,000 shares @ $0.50 per share called)
Bank A/c …Dr.			46,500
Calls in Arrears …Dr.			3,500
To Share Ist Call A/c				50,000
(Being the Ist Call money received @ $ 0.50 on 93,000 shares)
“B” ordinary shares
Bank A/c …Dr.			60,000
To Share Application A/c				60,000
(Being the application money received @ $ 0.50 on 120,000 shares)
Share Application A/c … Dr.			60,000
To Share Capital A/c				60,000
(No. of Shares allotted x application money per shares)
(Being the application money on 120,000 shares @ $0.50 per share transferred to share capital account)
Share Allotment A/c Dr.			60,000
To Share Capital A/c				60,000
(No. of Shares allotted x allotment money per share)
(Being the Allotment money on 120,000 shares @ $0.50 per share called)
Bank A/c …Dr.			60,000
To Share Allotment A/c				60,000
(Being the allotment money received @ $ 0.50 on 100,000 shares)
Reissue of Shares
Share Capital A/c … Dr.			14,000
To Calls in Arrears				3,500
To Forfeited Share A/c				10,500
(Being Share forfeited due to unpaid amount)
Forfeited Share A/c… Dr.			2,800
To Share Capital A/c				2,800
(Being Discount @ $ 0.40 provided for Share reissue for 7,000 shares)
Share Issue Expense A/c …Dr.			800
To Bank A/c				800
(Being Share issue cost amounted to $800 made)
Forfeited Share A/c… Dr.			800
To Share Issue Expense A/c				800
(Being Share issue cost amounted to $800 trasferred)
Bank A/c …Dr.			9,800
To Melbourne Investments Ltd				9,800
(Being Share reissue amount @ $ 1.40 recieved for 7,000 shares)
Forfeited Share A/c ...Dr.			6,900
To Former Shareholders				6,900
(Being Gain on Share reissue disbursed for 7,000 shares)

Gain on Reissue of Shares
Discount In Issue	2,800	Share Capital A/c	10,500
Share Issue Expense A/c	800
Net Gain	6,900
	10,500		10,500