In: Accounting
Accounting for share issues On 1 February 2017, Beach Supplies Ltd was registered and issued a prospectus inviting applications for 2,000,000 shares, at an issue price of $3.50, payable as follows: $1.00 on application $1.50 on allotment (payment due within 1 month of allotment) $0.60 on first call $0.40 on final call The issue is underwritten at a commission of $30,000. By 28 February 2017, applications had been received for 1,900,000 shares. On 3 March, shares are allotted, and the underwriter forwarded the application and allotment money due on the 100,000 shares less their commission. All remaining allotment money is received by 3 April. Legal costs re company formation are $5,000 and are paid on 5 April. Share issue costs of $3,000 are also paid on the same date. The first call is made on 10 April 2017, with money due by 10 May 2017. The final call is made on 15 May 2017, with money due by 15 June 2017. All money owing in relation to the two calls is received by the due dates except for the holders of 40,000 shares who did not pay either call, and the holder of another 10,000 shares who did not pay the second call. On 20 June 2017, as provided in the company’s constitution, the directors forfeited these 50,000 shares. On 25 June 2017, the forfeited shares are reissued as fully paid for a consideration of $3.10 per share. Costs of forfeiture and reissue amounted to $10,000, and are paid. The constitution allows for the refund of any balance in the forfeited shares account after reissue to former shareholders, so refunds were made on 30 June 2017. Required: Prepare the journal entries to record the transactions of Beach Supplies Ltd up to and including that which took place on 30 June 2017. Show all relevant dates, narrations and workings.
General Journal
28-feb-2017
Cash Trust Dr 19,00,000 (19,00,000 x 1.00)
Application Cr 19,00,000
(being receipt of applications for 19,00,000 shares at $1.00 per share)
03-March-2017
Equity share application a/c dr. 19,00,000
Equity share allotment a/c dr 28,50,000 (19,00,000 x1.5)
.Equity share Capital a/c cr 47,50,000 (19,00,000 + 28,50,000)
(being capitalization of application money & allotment money for 1,900,000 shares alloted)
03-April-2017
Bank a/c dr. 28,50,000
Equity share allotment a/c cr 28,50,000
(being receipt of allotment money for 19,00,000 shares alloted @ $1.50)
05-April-2017
Miscellaneous Expenditure A/c Dr .8,000 (5000+3000)
Bank A/c Cr. 8,000
Profit & Loss A/c Dr. 8,000
Miscellaneous Expenditure A/c. Cr. 8,000
10- May-2017
Share Capital A/c (1900,000 × 0.60) Dr. 11,40,000
Share First Calls/calls in arrear A/c Cr. 11,16000 (18,60,000 x 0.60)
Forfeited Share A/c ( 40,000 x 0.60) Cr. 24,000
15- June-2017
Share Capital A/c (1900,000 × 0.40) Dr. 7,60,000
Share Final Calls/calls in arrear A/c Cr. 7,40,000 (18,50,000 x 0.40)
Forfeited Share A/c ( 50,000 x 0.40) Cr. 20,000
25-June-2017
Bank A/c (50,000×3.10) Dr. 1,55,000
Forfeited Shares A/c (50,000×0.40) Dr. 20,000
Shares Capital Account (50,000×3.50) Cr. 1,75,000
(being forfieted shares are re issued @3.10)
Miscellaneous Expenditure A/c Dr .10,000
Bank A/c Cr. 10,000
(being cost of forfieture & re issue paid)
30-June-2017
Forfeited Shares A/c Dr. 24,000 (24,000+20,000-20,000)
Capital Reserve A/c Cr. 24,000
(being balance in forfieted shares account transferred to capital reserve)