Question 1 (30 marks) Morning Star Ltd was registered on 1 July 2019, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2019 inviting the public to apply for 1 000 000 Ordinary A class shares at $6.00 per share. The terms of the shares on issue are $3.00 on application, $2.00 on allotment and S1.00 to be called within six months of allotment before 31 December 2019. 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 July, the directors also decided to issue 100 000 non-voting Ordinary B shares as fully paid to the promoters for a payment of $5.00 per share. On 30 July, applications for the Ordinary A class shares closed. Applications for 1 500 000 shares in total had been received with applicants for 1 000 000 shares paying the full price and 500 000 shares paying only the application fee. On 1 August, the Ordinary A class shares were allotted on a pro-rate basis with all allotment money owed paid by the 30 August The company paid share issue costs of $10,000 for the issuing of Ordinary A shares on 1 September. 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 15 Septmber and due by 30 September. All call money was received except for the call on 30 000 shares. The directors met and forfeited the shares on 15 October. On 30 October, the forfeited shares were reissued at $5.50 fully paid to $6,00. Costs associated with reissuing the forfeited shares totalled $4,000. The remaining money was retained within the business on 15 November The directors decided on 1 November to make a one-day off of a bonus share issue to existing Ordinary A class shareholders for every 10 shares of holding On 1 January 2020, Morning Star Ltd issued via a private placement semi-annual coupon debentures (which pay interest every 6 months) with a nominal value of $400,000. The debenture term is three years and the coupon rate is 12% per year. The market requires a rate of retum of 10% per year. The money came in and the debentures were allotted on the same date. The first interest payment will occur on 30 June 2020. On the same day (1 January), Monring Star issued 100,000 options for class A shares with an exercise price of $6 cach. It costs $0.50 per option. These options expires on 30 June 2020. The company issued via a private placement 50,000 redeemable preference shares of $5.00 cach on 30 June 2020. The shares offer a fixed dividend of 5 per cent per annum. The shares are later redeemed to non-voting Ordinary Class B shares at the options of the shareholders on 30 June 2021 Page 2 of 7 Page 2 of 7 By 30 June 2020, 90,000 options were exercised. The remaining options are lapsed. Required: (a) Prepare journal entries for the above transactions for the year ended 30 June 2020. Note: the entries should be in strict date order of the underlying event. (24 marks) (b) Prepare an extract of the statement of change in equity to show the composition and movement of the ordinary shares account of Morning Star Ltd as at 30 June 2020 and 30 June 2021. Please provide the opening balance, change in share capital and closing balance of each classes of shares. (6 marks) Question 1 (30 marks) Morning Star Ltd was registered on 1 July 2019, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2019 inviting the public to apply for 1 000 000 Ordinary A class shares at $6.00 per share. The terms of the shares on issue are $3.00 on application, $2.00 on allotment and S1.00 to be called within six months of allotment before 31 December 2019. 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 July, the directors also decided to issue 100 000 non-voting Ordinary B shares as fully paid to the promoters for a payment of $5.00 per share. On 30 July, applications for the Ordinary A class shares closed. Applications for 1 500 000 shares in total had been received with applicants for 1 000 000 shares paying the full price and 500 000 shares paying only the application fee. On 1 August, the Ordinary A class shares were allotted on a pro-rate basis with all allotment money owed paid by the 30 August The company paid share issue costs of $10,000 for the issuing of Ordinary A shares on 1 September. 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 15 Septmber and due by 30 September. All call money was received except for the call on 30 000 shares. The directors met and forfeited the shares on 15 October. On 30 October, the forfeited shares were reissued at $5.50 fully paid to $6,00. Costs associated with reissuing the forfeited shares totalled $4,000. The remaining money was retained within the business on 15 November The directors decided on 1 November to make a one-day off of a bonus share issue to existing Ordinary A class shareholders for every 10 shares of holding On 1 January 2020, Morning Star Ltd issued via a private placement semi-annual coupon debentures (which pay interest every 6 months) with a nominal value of $400,000. The debenture term is three years and the coupon rate is 12% per year. The market requires a rate of retum of 10% per year. The money came in and the debentures were allotted on the same date. The first interest payment will occur on 30 June 2020. On the same day (1 January), Monring Star issued 100,000 options for class A shares with an exercise price of $6 cach. It costs $0.50 per option. These options expires on 30 June 2020. The company issued via a private placement 50,000 redeemable preference shares of $5.00 cach on 30 June 2020. The shares offer a fixed dividend of 5 per cent per annum. The shares are later redeemed to non-voting Ordinary Class B shares at the options of the shareholders on 30 June 2021 Page 2 of 7 Page 2 of 7 By 30 June 2020, 90,000 options were exercised. The remaining options are lapsed. Required: (a) Prepare journal entries for the above transactions for the year ended 30 June 2020. Note: the entries should be in strict date order of the underlying event. (24 marks) (b) Prepare an extract of the statement of change in equity to show the composition and movement of the ordinary shares account of Morning Star Ltd as at 30 June 2020 and 30 June 2021. Please provide the opening balance, change in share capital and closing balance of each classes of shares. (6 marks)