Question

Oyolium Ltd was incorporated 10 years ago and has been quite successful. The company wants to expand and requires further funds to do so. Rather than seeking finance from Banks it decides to offer Ordinary shares to the public. A Prospectus was issued on 1^st August 20X3 seeking applications for 5,000,000 Ordinary share at $10.00 each. Details of the offer are:

• $3.00 on Application to be received on or by 30^th September 20X3
• $2.00 payable on Allotment
• The remaining $5.00 to be available for Call at the company’s discretion.

Applications for 7,000,000 shares were received by the required date. Details are:

• 1,000,000 applications paid for the shares in full (ie $10.00)
• The remaining applications (6,000,000) paid $3.00 as requested.

The company decided to deal with the oversubscription as follows:

• The applications who paid for their shares in full were allotted all the share applied for. Excess money was held by the company.
• Of the remaining applications:
• 1,000,000 applicants had their applications refused and their money refunded.
• The remaining applications (5,000,000) were allotted shares in proportion to their applications (ie 4/5). Any excess money was retained by the company.

Shares were allotted on the 1^st October 20X3 and all allotment monies were received on 31^st October 20X3.

On the 1^st January 20X4 the company made a call of $2.50 per share required to be paid by the 28^th February 20X4. All shareholders paid their monies as required.

REQUIRED

Prepare all the general journal entries in the records of Oyolium Ltd to record all the described events above.

Answer 1

30-Sep	Cash Trust   A/c                             Dr.	2800000
	To Application		2800000
	=(100000*10)+(600000*3)
	Application A/c                   Dr.	300000
	To Cash trust A/c		300000
	=100000*3 Refund to 100000 Applicants
	Application A/c                    Dr.	1500000
	Allotment A/c                       Dr.	1000000
	To Share Capital A/c		2500000
	(Allotment of 500,000 shares)
	Cash A/c                                 Dr.	2500000
	To Cash Trust		2500000
	(transfer of trust funds)
	Application A/c                  Dr.	1000000
	To Allotement A/c		500000
	To Calls in Advance		500000
	(allocation of application across allotment and calls in advance)
31-Oct	Allotment A/c          Dr.	300000
	To Share capital		300000
	Cash A/c                      Dr.	300000
	To Allotment A/c		300000
	Call 1 A/c                      Dr.	1250000
	To Share Capital		1250000
	Calls in Advance A/c      Dr.	250000
	To Calls A/c		250000
	Cash A/c     Dr.	1000000
	To Calls		1000000
30-Sep	Cash Trust   A/c                             Dr.	2800000
	To Application		2800000
	=(100000*10)+(600000*3)
	Application A/c                   Dr.	300000
	To Cash trust A/c		300000
	=100000*3 Refund to 100000 Applicants
	Application A/c                    Dr.	1500000
	Allotment A/c                       Dr.	1000000
	To Share Capital A/c		2500000
	(Allotment of 500,000 shares)
	Cash A/c                                 Dr.	2500000
	To Cash Trust		2500000
	(transfer of trust funds)
	Application A/c                  Dr.	1000000
	To Allotement A/c		500000
	To Calls in Advance		500000
	(allocation of application across allotment and calls in advance)
31-Oct	Allotment A/c          Dr.	300000
	To Share capital		300000
	Cash A/c                      Dr.	300000
	To Allotment A/c		300000
	Call 1 A/c                      Dr.	1250000
	To Share Capital		1250000
	Calls in Advance A/c      Dr.	250000
	To Calls A/c		250000
	Cash A/c     Dr.	1000000
	To Calls		1000000