Question 2 [16 marks]

Accounting for share issues

The constitution of Harriette Ltd indicates that the company is able to issue up to 5,000,000 ordinary shares and 1,000,000 preference shares. Prospectuses are published on 1 January 2017, offering 1,000,000 preference shares at $2.00 payable in full on application by 31 March 2017, and 2,000,000 ordinary shares at $5.00 with $3.00 due on application by 31 March 2017, $1.50 due within one month of allotment, and $0.50 due on a call to be made by the directors at a later date.

By 31 March 2017, the company has received applications for 800,000 preference shares and applications for 2,200,000 ordinary shares. On 15 April 2017, the ordinary and preference shares are allotted. The ordinary shares are allotted to applicants on a pro-rata basis, and the excess application money is retained and credited against amounts due on allotment. All allotment money is received by 15 May 2017.

The directors make the call on the ordinary shares on 1 August 2017, with amounts due by 1 September. By this date, amounts due on 1,950,000 ordinary shares have been received. On 15 September 2017, the shares on which call money has not been received are forfeited and sold as fully paid. An amount of $4.20 is received for each share sold. Costs of the forfeiture and reissue amount to $7,500, and are paid. The constitution does not provide for refund of any balance in the forfeited shares account after reissue to former shareholders.

Required:

Prepare the journal entries to record the transactions of Harriette Ltd up to and including that which took place on 15 September 2017. Show all relevant dates, narrations and workings.

Marking Guide - Question 2	Max. marks awarded
Journal entries	13
Dates	1
Workings	2