Question
EXERCISE 3.4 Share issue, options 2 Madrid Ltd has the following shareholders' equity at 1 January 2006: Share capital-500.000 shares Asset revaluation reserve Retained
EXERCISE 3.4 Share issue, options 2 Madrid Ltd has the following shareholders' equity at 1 January 2006: Share capital-500.000 shares Asset revaluation reserve Retained earnings $1.240000 350000 110000 On 1 March the company decided to make a public share issue to raise $600 000 for new capital development. The company issued a prospectus inviting applications for 200000 $3 shares, payable in full on application. Shareholders who acquired more than 10 000 shares were allowed to buy options at 50c each. These options enabled the owner to buy shares in Madrid Ltd at $3.50 each, the acquisition having to occur before 31 December 2006. By 25 March the company had received applications for 250 000 shares and for 20000 options. The shares and options were allotted on 2 April, and money returned to unsuc- cessful applicants on the same day. All applicants who acquired options also received shares. By 31 December 2006, the company's share price had reached $3.75. Holders of 18000 options exercised their options in December. The remaining options lapsed. Required Prepare the journal entries in the records of Madrid Ltd in relation to the equity trans- actions in 2006.
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