Due to high demand for face masks, Aussie Mask Ltd commences operation In Westmead by making a public offer of its shares. The directors are from Sydney and its prospectus notes that the shares are to be issued at $2.00 per share. The shares are to be paid in three instalments. The first payment, to be made on application, is $0.80. A second amount of $0.80 will be due within one month of allotment, and the third amount of $0.40 will be due within one month of the first and final call. Aussie Mask Ltd will seek to issue 5 million shares. The closing date for application is 31 August 2020.

By the closing date, applications have been received for 7 million shares. To deal with the oversubscription, Aussie Mask Ltd has decided to issue shares to all subscribers on a pro rata basis.

All amounts due on allotment are paid by the due date. The first and final call for $0.40 is made on 30 November 2020, with the amounts being due by 31 December 2020. Holders of one million shares fail to pay the amount due on the call by the due date, and on 15 January 2021 these holders have their shares forfeited. The forfeited shares are auctioned on 15 February 2021. An amount of $1.40 per share is received. The cost of holding the auction is $3,500. The shares are sold as 'fully paid'.

Required:

3.1 When shares are issued, accounts such as the Bank Trust, application, allotment and call accounts are used. For each account describe, respectively, whether these accounts are assets or liabilities (or neither). (4 Marks)

3.2 Provide the accounting journal entries necessary to account for the transactions and events in question 3 above. (21 Marks)