Prepare the general journal entries to record the above independent scenarios.
Narrations to general journal entries must be provided.
Complete and detailed workings/calculations must be shown.
Absence of workings/calculations may lead to zero marks allocated to the particular general journal entry, despite the fact that the entry might be correct!
The directors decided to offer 150,000 ordinary shares to the public at an issue price of $2, payable as follows: March 5 $0.90 on application (due 15 April) $0.50 on allotment (due 10 May) $0.60 on future calls The issue was underwritten at a commission of $16,000. Applications had been received for 130,000 shares. At the directors' meeting it was decided to allot all shares. April 15 April 20 April 23 The underwriting commission was paid. The underwriter paid the application and allotment money on this date. Other share issue costs of $6,000 were also paid on this date. All outstanding ltment money was received. November 10 The final call was made, with payment due by 20 December. December20 All money was received on the due date except for the holders of 10,000 shares who failed to meet the final call January 25 As provided for in the constitution, the directors decided to forfeit these ordinary shares and the company is also entitled to keep any balance from forfeiture of these ordinary shares January 8 A prospectus was issued, inviting applications for 200,000 "B" ordinary shares at an issue price of $2, payable full on application. The purpose of the issue was to fund the redemption of the preference shares 200,000 "A" ordinary shares, issued at $1, fully paid 100,000 redeemable preference shares, issued at $ 4, fully paid 50,000 $2 Options Asset revaluation reserve Retained earnings $ 200,000 $ 400,000 $ 100,000 $ 100,000 $770,000 February 8 The issue closed fully subscribed, with all money due having been received. The 200,000 "B" ordinary shares were allotted on the same day. As previously indicated, the directors resolved to redeem the preference shares (equity) out of the proceeds of the "B" ordinary shares. Cheques were issued to the preference shareholders. February 1 The company offered ordinary shareholders 2 options (at a price of $0.80 per option) for every ten ordinary shares held. Each option entitled the holder to buy two ordinary shares at a price of $3 per share, exercisable on 1 April 200,000 "A" ordinary shares, issued at $1, fully paid 120,000 "B" ordinary shares, issued at $1.50, called to $1 General reserve Retained earnings $ 200,000 $ 120,000 $ 100,000 $ 500,000 March 1 75% of the available options were taken up by shareholders, for which all money due was received April 1 As a result of options having been exercised, 80,640 shares were issued and for which money had been received. The unexercised options lapsed Required: Scenario 1 Scenario 2 Date Account Dr $ Date Account Jun-01 Share issue cost Jul-01 No Entry 2500 Cash 2500 (Being the amount paid to underwriters ) Aug-01 Cash Trust 300000 3+1450000 1.5) 2775000 Application (Being the cash received on appliaction) 2775000 Sep-31 Cash Trust (50000 2) 100000 Application (50000*2) (Being the amount received on application) 100000 Aug-05 Allotment (300000+1450000 0.5) 1625000 Share Capital To record the capital acquired on allotment) 1625000 Oct-10 Application 100000 Allotment (40000*2) Share Capital (Being the total amount of capital received) 80000 Allotment and Call (240000 1.5) Application To record the amount transferred from surplus amount on application) 180000 360000 360000 Aug-30| Cash (1625000#0.5) 812500 Allotment To record the outstanding amount received on allotment 812500 Nov-28 Cash (1500000 1) 1500000 Call 1500000 To record the amount received on final call) Scenario 3 Date Scenario 4 Dr $ e Account Feb-08 Share Capital (8750 1.8) Dr$Cr $ 15750 Account Cr $ Date Jan-05 Retained Earning 15000 Shareholders Redemption To record the amount paid to redeem the preference shares from profit) 15000 Call in arrears Forfeited Liability (8750 1.4) To record the amount on forfeited shares) 3500 12250 Cash (150000 1) Ordinary Share Capital To record the amount received on ordinary shares) 150000 Feb-20 Cash 150000 12250 Forfeited Liability Share Capital To record the forfeited shares reissued to Melbourne) 3500 15750 Cash (65000 1) Redemable preference share capital To record the amount received on preference shares issued) 65000 65000 Forfeited Liability Cash 500 500 To record the cost incurred on the reissue of forfeited shares) The directors decided to offer 150,000 ordinary shares to the public at an issue price of $2, payable as follows: March 5 $0.90 on application (due 15 April) $0.50 on allotment (due 10 May) $0.60 on future calls The issue was underwritten at a commission of $16,000. Applications had been received for 130,000 shares. At the directors' meeting it was decided to allot all shares. April 15 April 20 April 23 The underwriting commission was paid. The underwriter paid the application and allotment money on this date. Other share issue costs of $6,000 were also paid on this date. All outstanding ltment money was received. November 10 The final call was made, with payment due by 20 December. December20 All money was received on the due date except for the holders of 10,000 shares who failed to meet the final call January 25 As provided for in the constitution, the directors decided to forfeit these ordinary shares and the company is also entitled to keep any balance from forfeiture of these ordinary shares January 8 A prospectus was issued, inviting applications for 200,000 "B" ordinary shares at an issue price of $2, payable full on application. The purpose of the issue was to fund the redemption of the preference shares 200,000 "A" ordinary shares, issued at $1, fully paid 100,000 redeemable preference shares, issued at $ 4, fully paid 50,000 $2 Options Asset revaluation reserve Retained earnings $ 200,000 $ 400,000 $ 100,000 $ 100,000 $770,000 February 8 The issue closed fully subscribed, with all money due having been received. The 200,000 "B" ordinary shares were allotted on the same day. As previously indicated, the directors resolved to redeem the preference shares (equity) out of the proceeds of the "B" ordinary shares. Cheques were issued to the preference shareholders. February 1 The company offered ordinary shareholders 2 options (at a price of $0.80 per option) for every ten ordinary shares held. Each option entitled the holder to buy two ordinary shares at a price of $3 per share, exercisable on 1 April 200,000 "A" ordinary shares, issued at $1, fully paid 120,000 "B" ordinary shares, issued at $1.50, called to $1 General reserve Retained earnings $ 200,000 $ 120,000 $ 100,000 $ 500,000 March 1 75% of the available options were taken up by shareholders, for which all money due was received April 1 As a result of options having been exercised, 80,640 shares were issued and for which money had been received. The unexercised options lapsed Required: Scenario 1 Scenario 2 Date Account Dr $ Date Account Jun-01 Share issue cost Jul-01 No Entry 2500 Cash 2500 (Being the amount paid to underwriters ) Aug-01 Cash Trust 300000 3+1450000 1.5) 2775000 Application (Being the cash received on appliaction) 2775000 Sep-31 Cash Trust (50000 2) 100000 Application (50000*2) (Being the amount received on application) 100000 Aug-05 Allotment (300000+1450000 0.5) 1625000 Share Capital To record the capital acquired on allotment) 1625000 Oct-10 Application 100000 Allotment (40000*2) Share Capital (Being the total amount of capital received) 80000 Allotment and Call (240000 1.5) Application To record the amount transferred from surplus amount on application) 180000 360000 360000 Aug-30| Cash (1625000#0.5) 812500 Allotment To record the outstanding amount received on allotment 812500 Nov-28 Cash (1500000 1) 1500000 Call 1500000 To record the amount received on final call) Scenario 3 Date Scenario 4 Dr $ e Account Feb-08 Share Capital (8750 1.8) Dr$Cr $ 15750 Account Cr $ Date Jan-05 Retained Earning 15000 Shareholders Redemption To record the amount paid to redeem the preference shares from profit) 15000 Call in arrears Forfeited Liability (8750 1.4) To record the amount on forfeited shares) 3500 12250 Cash (150000 1) Ordinary Share Capital To record the amount received on ordinary shares) 150000 Feb-20 Cash 150000 12250 Forfeited Liability Share Capital To record the forfeited shares reissued to Melbourne) 3500 15750 Cash (65000 1) Redemable preference share capital To record the amount received on preference shares issued) 65000 65000 Forfeited Liability Cash 500 500 To record the cost incurred on the reissue of forfeited shares)
