Question 1 (10 marks)

A newly registered company, Golden Mile Investments Ltd, has issued a prospectus dated 1^st January 2018 inviting the public to apply for the following classes of shares. Both classes of shares have voting rights:

216,000 Ordinary A shares at $6 per share. The terms of the shares on issue are $2.50 on application, $1.50 on allotment, $1.20 on the first call and $0.80 on the second call.

200,000 Ordinary B shares at $3 per share, $2.00 on application and $1.00 on 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 28^th February 2018 applications closed and applications had been received for the following:

Ordinary A Shares

Applications were received for 240,000 shares in total, with applications for 50,000 shares paying $6, applications for 100,000 shares paying $4.00 and the remainder paying only the application fee.

Ordinary B Shares

Applications were received for 250,000 Ordinary B shares, with all applications received paying the full $3.00.

On the 28^th of March the shares were allotted, with all allotment money owed paid by the 15^th of April. On the 28^th of March, share issue costs of $10,000 for the Ordinary A shares and $15,000 for the Ordinary B shares were also paid. 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.

On 1^st May the first call is made on the Ordinary A shares and on 1^st June the call money was received except for the call on 6,000 shares. The shares were forfeited on 15^th June. On 20^th June the $6 shares were reissued at $5 paid to $5.20. Costs associated with reissuing the forfeited shares totalled $5,000. The money has not yet been refunded to the defaulting shareholders.

Required:

(Include all workings)

Prepare separate schedules, one for the Ordinary A share issue and one for the Ordinary B 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. (4 marks)

Prepare journal entries for the above transactions. Note: each class of ordinary shares should have separate application, allotment and share capital accounts and the entries should be in strict date order of the underlying event. (Narrations required) (6 marks)