Question

Question 3 Week 4

Aqua Ltd issues a prospectus inviting the public to subscribe for 30 million ordinary shares of $2.00 each. The terms of the issue are that $1.00 is to be paid on application and the remaining $1.00 within one month of allotment.

Applications are received for 36 million shares during July 2019. The directors allot 30 million shares on 15 August 2019. The shares were allotted on a first-come, first-serve basis. The directors refunded the application money for 6 million shares on 15 August 2019. The amounts payable on the allotment are due by 20 September 2019.

By 20 September 2019, the holders of 5 million shares have failed to pay the amounts due on allotment. The directors forfeit the shares on 30 September 2019. The shares are resold on 15 October 2019 as fully paid. An amount of $1.90 per share is received. The remaining balance of forfeited shares was refunded on 20 October 2019. Required

Provide the journal entries necessary to account for the above transactions and events.

Answer 1

Ans: Journal Entries

Date	Account title and Explanation	Debit($)	Credit($)
July 2019	Bank {36 Million*$1}	$36,000,000
	Share Application		$36,000,000
	{ to record receipt of Applications}
15 Aug 2019	Share Application	36,000,000
	Share Capital		30,000,000
	Bank		6,000,000
	{ to record issuing Shares}
20 Sept 2019	Share Allotment	30,000,000
	Share Capital		30,000,000
	{ to record Calls Due}
20 Sept 2019	Bank	25,000,000
	Calls In Arrears	5,000,000
	Share Allotment		30,000,000
	{ to record receipt of called up amount}
30 Sept 2019	Share capital	10,000,000
	Calls In Arrears		5,000,000
	Share forfeiture		5,000,000
	{ to record forfeiture of Shares}
15 Oct 2019	Bank A/c{1.90*5,000,000}	9,500,000
	Share Forfeiture	500,000
	Share Capital		10,000,000
	{ to record forfeiture Shares reissued}
20 oct 2019	Share Forfeiture{5,000,000-500,000}	4,500,000
	Bank		4,500,000
	{ to record return Share forfeiting}