Question

Patterson Ltd was registered on 18 March 2017, as a company with a constitution limiting the shares that could be offered to; 4 000 000 Ordinary A shares and 2 000 000 non-voting Ordinary B shares. The company issued a prospectus dated 12 May inviting the public to apply for 3 000 000 Ordinary A class shares at $2.50 per share. The terms of the shares on issue are $1.00 on application, $1.00 on allotment and $0.50 to be called within six months of 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 15 May the directors also decided to issue 1 000 000 non voting Ordinary B shares as fully paid to the promoters for a payment of $2.00 per share. On 30 June applications closed. Applications for 4 500 000 shares in total had been received with applicants for 1 500 000 shares paying $2.50 and the remainder paying only the application fee. On 4 July the shares were allotted, with all allotment money owed, paid by the 30 July. On 22 July share issue costs of $35,000 for the Ordinary A shares. 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. The call on the Ordinary A shares was made on 25 August and due by 30 September. All call money was received except for the call on 20 000 shares. The directors met and forfeited the shares on 8 October. On 23 October the $2.50 shares were reissued at $2.20 fully paid to $2.50. Costs associated with reissuing the forfeited shares totalled $8,000. The money was refunded to the defaulting shareholders on 10 November. The directors announced on 23 November that they were to make a further issue of 1 000 000 Ordinary A shares in 8 months time for $4.00 per share. They issued a call option on these shares, with $0.60 payable by 15 December. All options were sold. Required: '

(a) Prepare a schedule for the Ordinary A 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.

(b) Prepare journal entries for the above transactions. Note: the entries should be in strict date order of the underlying event. (Narrations required)

Answer 1

a)

Ordinary Shares A
• number of shares applied for;	45,00,000
• number of shares allotted	30,00,000
• total cash received;	6750000
	15,00,000	Shares	2.5	37,50,000
	30,00,000	Shares	1	30,00,000
				67,50,000
• cash received that relates to application;	45,00,000	(4500000*1)
• cash received that relates to allotment;	15,00,000	(1500000*1)
• cash received that relates to calls (in advance);	7,50,000	(1500000*.5)
• cash refunded.	22,50,000
	Actual		Prorata		Refund		Amount
	1500000	Shares	1000000	(1500000*.66)	500000	2.5	1250000
	3000000	Shares	2000000	(3000000*.66)	1000000	1	1000000
							2250000
b) Date Ledgers Debit Credit 12-05-2017 Application-Ordinary Shares A 3000000 Allotment-Ordinary Shares A 3000000 Call-Ordinary Shares A 1500000 Share Capital-Ordinary Shares A 7500000 Prospectus issued for 3000000 shares @ 2.5 per share 15-05-2017 Call-Non voting Ordinary Shares B            20,00,000 Share Capital-Non voting Ordinary Shares B                  20,00,000 Promoter shares issued for 1000000 shares @ 2 per share 30-06-2017 Bank            20,00,000 Call-Non voting Ordinary Shares B                  20,00,000 Amount received from promoters 30-06-2017 Bank 6750000 Application-Ordinary Shares A 4500000 Allotment-Ordinary Shares A 1500000 Call-Ordinary Shares A 750000 Amount received for 45000000 shares 04-07-2017 Bank Trust 2250000 Application-Ordinary Shares A 1500000 Allotment-Ordinary Shares A 500000 Call-Ordinary Shares A 250000 excess amount transferred to Trust 04-07-2017 Share liability 2250000 Bank Trust 2250000 Excess Amount paid back 22-07-2017 Share issue cost 35000 Bank 35000 Share issue cost paid 30-07-2017 Bank 2000000 Allotment-Ordinary Shares A 2000000 Allotment received 30-09-2017 Bank 900000 Call-Ordinary Shares A 900000 calls received for 1800000 shares 08-10-2017 Application-Ordinary Shares A 20000 Allotment-Ordinary Shares A 20000 Forefeited shares 40000 20000 shares forefetied 23-10-2017 reissue cost 8000 Bank 8000 reissue cost paid 23-10-2017 Bank 44000 reissue cost 6000 Application-Ordinary Shares A 20000 Allotment-Ordinary Shares A 20000 Forefeited shares 10000 reissue amount received 10-11-2017 Forefeited shares 26000 Bank 26000 (40000-8000-6000)amount paid to forefeit share holders 23-11-2017 Call-Ordinary Shares A 600000 Share Capital-Ordinary Shares A 600000 fresh issue called @0.6 each 15-12-2017 Bank 600000 Call-Ordinary Shares A 600000 fresh issue received @0.6 each