In: Accounting
A newly registered company, Golden Mile Investments Ltd, has issued a prospectus dated 1st January 2018 inviting the public to apply for the following classes of shares. Both classes of shares have voting rights:
216,000 Ordinary A shares at $6 per share. The terms of the shares on issue are $2.50 on application, $1.50 on allotment, $1.20 on the first call and $0.80 on the second call.
200,000 Ordinary B shares at $3 per share, $2.00 on application and $1.00 on allotment.
If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess application money will be applied to allotment and calls before any refunds will be given.
On 28th February 2018 applications closed and applications had been received for the following:
Ordinary A Shares
Applications were received for 240,000 shares in total, with applications for 50,000 shares paying $6, applications for 100,000 shares paying $4.00 and the remainder paying only the application fee.
Ordinary B Shares
Applications were received for 250,000 Ordinary B shares, with all applications received paying the full $3.00.
On the 28th of March the shares were allotted, with all allotment money owed paid by the 15th of April. On the 28th of March, share issue costs of $10,000 for the Ordinary A shares and $15,000 for the Ordinary B shares were also paid. The share issue costs related to legal expenses associated with the share issue and fees associated with the drafting and advertising of the prospectus and share issue.
On 1st May the first call is made on the Ordinary A shares and on 1st June the call money was received except for the call on 6,000 shares. The shares were forfeited on 15th June. On 20th June the $6 shares were reissued at $5 paid to $5.20. Costs associated with reissuing the forfeited shares totalled $5,000. The money has not yet been refunded to the defaulting shareholders.
Required:
(Include all workings)
Prepare separate schedules, one for the Ordinary A share issue and one for the Ordinary B share issue that shows the break-up of:
number of shares applied for;
number of shares allotted;
total cash received;
cash received that relates to application;
cash received that relates to allotment;
cash received that relates to calls (in advance); and
cash refunded.
Prepare journal entries for the above transactions. Note: each class of ordinary shares should have separate application, allotment and share capital accounts and the entries should be in strict date order of the underlying event. (Narrations required)
Schedule : Ordinary A share ($6/share)
Description |
Fully paid shares |
Paid $ 4/share |
Paid $ 2.50/share |
Total ($) |
Nos. of shares applied for |
50000 |
100000 |
90000 |
240000 |
nos. of shares allotted |
45000 |
90000 |
81000 |
216000 |
Total cash received |
300000 |
400000 |
225000 |
925000 |
Cash received that relates to application |
112500 |
225000 |
202500 |
540000 |
Cash received that relates to allotment |
67500 |
135000 |
22500 |
225000 |
Cash received that relates to calls (in advance) |
90000 |
40000 |
0 |
130000 |
Cash refunded |
30000 |
0 |
0 |
30000 |
Schedule : Ordinary B share ($3/share)
Description |
Amount ($) |
Nos. of shares applied for |
250000 |
nos. of shares allotted |
200000 |
Total cash received |
750000 |
Cash received that relates to application |
400000 |
Cash received that relates to allotment |
200000 |
Cash refunded |
150000 |
Journal Entries
S. No. |
Date |
Description |
Debit ($) |
Credit ($) |
1 |
28.02.2018 |
Bank A/c |
1675000 |
|
Share Application (Share A) A/c |
925000 |
|||
Share Application (Share B) A/c |
750000 |
|||
(Being share application money received ) |
||||
2. |
28.03.2018 |
Share Application (Share A) A/c |
540000 |
|
Share Application (Share B) A/c |
400000 |
|||
Share Capital A/c |
900000 |
|||
(Being allotment of share made and application money transferred to share capital A/c i.e. $2.50 & $ 2 /share for share A & b respectively) |
||||
3. |
28.03.2018 |
Share Issue Expenses A/c |
25000 |
|
Bank A/c |
25000 |
|||
(Being expenses for issue of shares of Rs. $10000 for share A & $ 15000 for share B) |
||||
4 |
28.03.2018 |
Share Application (Share A) A/c |
30000 |
|
Share Application (Share B) A/c |
150000 |
|||
Bank A/c |
180000 |
|||
5. |
15.04.2018 |
Bank A/c |
99000 |
|
Share Application (Share A) A/c |
225000 |
|||
Share Application (Share B) A/c |
200000 |
|||
Share Capital A/c |
524000 |
|||
(Being allotment money received and earlier received was transferred from share application a/c i.e. $1.50 & $ 1 /share for share A & b respectively) |
||||
6 |
01.05.2018 |
Share First Call (Share A) A/c |
259200 |
|
Share Capital A/c |
259200 |
|||
(being first call due on Share A for $ 1.20/share) |
||||
7 |
01.06.2018 |
Bank A/c Dr. |
158000 |
|
Share Application (Share A) A/c |
94000 |
|||
Share First Call (Share A) A/c |
252000 |
|||
(Being call money received for 210000 shares of $ 1.20 each) |
||||
8. |
15.06.2018 |
Share Capital A/c |
31200 |
|
Share Forfeiture A/c |
24000 |
|||
Share First Call (Share A) A/c |
7200 |
|||
(Being 6000 shares A forfeited due to non-payment of first call) |
||||
9. |
20.06.2018 |
Bank A/c |
30000 |
|
Share Forfeiture A/c |
1200 |
|||
Share Capital A/c |
31200 |
|||
(Being 6000 forfeited share A were reissued at $5 paid to $5.20) |