Question 1 (7 marks)

XYZ Ltd was registered on 30 June 2020. The next day, the directors issued a prospectus inviting applicants for 200,000 ordinary shares with an issue price of $1. The shares were payable in full on application. By 31 July, the company had received 400,000 applications, together with the application monies. The directors allotted 200,000 shares on 1 August and returned the money for additional applications.

Required:

1. Prepare general journal entries to record the above data. (3.5 marks)

ANSWER: ** Answer box will enlarge as you type

XYZ Ltd

Journal entries

Date	Particular	Dr($)	Cr($)
July, 31,2020	Bank a/c..Dr	400000
	To share application(400000shares*$1)		400000
	(Being share application money received)
Aug, 01,2020	Share application a/c..Dr	400000
	To share capital(200000*1)		200000
	To Bank(200000*$1)		200000
	(Being share application money transferred to share capital and excess of application money refunded)

2. Enter the above data into the ledger tables below. (3.5 marks)

		Debit $	Credit $	Balance $
	Trust account
2020
	Application
2020
	Paid-up capital
2020
	Bank
2020