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Scenario 1 Financing Company Operations The equity of ChiHerbal Ltd as at 30 June 2018 comprises...

Scenario 1 Financing Company Operations

The equity of ChiHerbal Ltd as at 30 June 2018 comprises the following:

320 000 ordinary Class 1 shares, issued at $4, fully paid $1 280 000

240 000 ordinary Class 2 shares, issued at $4, called to $2.40 576 000

40 000 6% redeemable preference shares, issued at $3.00, fully paid 120 000

Share issue costs (4 272)

Calls in advance (at $1.60) 25 600   

Share options (issued at $1.20, fully paid) 38 400

Retained earnings 508 800

The options are exercisable by 28 February 2019. Each option entitles the holder to acquire two ordinary Class 3 shares at a price of $3.60 per share, payable by 28 February 2019.

The following transactions occurred during the financial year ending 30 June 2019:

2018

Oct. 20 The preference shares were redeemed out of Retained earnings at a 5% premium.

25 Cheques were issued to the preference shareholders.

Nov. 1 A 1-for-5 renounceable rights offer was made to ordinary Class 1 shareholders at an issue price of $3.80 per share. The offer’s expiry date is 30 November 2018. The rights issue is underwritten at a commission of $4 800.

30 Holders of 256 000 shares accept the rights offer, with other rights being renounced to the underwriter. Ordinary Class 1 shares are issued and money received.

Dec.20 The underwriting commission is paid.

2019

Jan.10 The directors transfer $56000 from Retained earnings to a General reserve account.

Feb.28 As a result of options being exercised, 56 000 ordinary Class 3 shares are issued.

April 30 Unexercised options lapse

May 31 The final call, due by 31 May 2019, is made on the partly paid shares. All call money is received by this date, except for that due on 12 000 shares.

June 18 The shares on which the final call was unpaid are forfeited.

26 The forfeited shares are reissued, credited as paid to $4, for $3.60 cash per share. The balance of the Forfeited Shares account will be refunded to the former shareholders on 27 June.

27. Pay refund to former holders of forfeited shares.

Required:

a) Prepare general journal entries to record the above transactions.

Note: Show all your workings. Journal narrations are required.

b) Prepare the equity section of ChiHerbal’s statement of financial position as at 30 June 2019 once the above transactions have been recorded.

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ekkarill92 answered 1 year ago
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