Question

Problem 1

According to its Articles of Incorporation ABC PLC has the right to raise 15 million shares having a face value of $1 each during its lifetime. The Corporation’s balance sheet shows a share capital of 2 million ordinary shares on 31 Dec 2018 having a face value of $1 each. It had cash worth $0.6 million and other assets to the value of $1.8 million. Liabilities were valued at $0.4 million.

On 1 Jan. 2019, the corporation issued 1 million ordinary shares having face value of $1 each issued at par for cash.The corporation received 90% subscription from its investors by 10 Jan, which was the date when the issue closed.

As on 31 Dec 2018

1. What is ABC PLC’s authorized share capital?
2. What is the paid-up share capital of the corporation?
3. What is the balance sheet total of the corporation?

As on 30 June 2019

4. Has the issue been oversubscribed or undersubscribed?
5. What is the issued capital of the corporation?
6. What is the subscribed capital of the corporation?
7. What is the paid-up share capital of the corporation?
8. Show the journal entries on 10 Jan. 2019 (below)
1. Show the balance sheet components on 31 Dec 2018 and the changes in the balance sheet on 30 June 2019(below)

JOURNAL ENTRIES

Date	Account	Debit/Credit	Amount
10 Jan 2019

CHANGES IN THE BALANCE SHEET

	31st Dec 2018	30th June 2019
Assets:
Cash
Other assets
Total Assets
Liabilities:
Total liabilities
Shareholders’ Equity:
Share capital
Additional paid in capital
Total Shareholders’ equity
Balance sheet total

Answer 1

a.) The authorized share capital of the company is $15 million (15 millions shares of 1$ each)

b.) The paid up share capital of the corporation is $2 million (2 million shares of 1$ each)

c.) As on 31st December 2018 the balance sheet(t-shaped) stands as follows:

		in millions of $
Liabilities	Amount	Assets	Amount
Equity share capital	2	Cash	0.6
Other liabilities	0.4	Other assets	1.8
Total	2.4	Total	2.4

d.) Since the issue has been subscribed only to the extent of 90%, the issue stands under subscribed.

e.) The issued capital of the corporation as on 30th June is $3 million (2 million which was existing and $1 million issued on 1st January)

f.) The subscribed capital of the corporation as on 30th June is $2.9 million (2million which was existing and 90% of $1 million issued on 1st January)

g.) The paid up capital of the corporation is the capital for which cash has been received by the corporation. therefore, the paid up capital is 2.9 million assuming that cash for 90% of $ 1 million share capital issued on 1st January was paid for)

h.) Journal entry for issue of share capital on 1 January

Bank A/c     Dr $.9 million

          To Equity share capital A/c $.9 million

(Being share capital issued)

h.)

CHANGES IN THE BALANCE SHEET
Particulars	31st Dec 2018	30th June 2019
Assets:
Cash	0.6	1.5
Other assets	1.8	1.8
Total Assets	2.4	3.3
Liabilities:
Total liabilities	0.4	0.4
Shareholders’ Equity:
Share capital	2	2
Additional paid in capital	0	0.9
Total Shareholders’ equity	2	2.9
Balance sheet total	2.4	3.3