QUESTION 2: COMPANY EQUITY AND REVENUE RECOGNITION On 30 June 2015, the equity accounts of Britain Ltd consisted of: 175,000 A ordinary shares, issued at $2.50 each, fully paid $437,500 50,000 6% cumulative preference shares, issued at $3 and paid to $2 $100,000 Options (20,000 at 56c each) $11,200 Accumulated losses ($6 250) As the company had incurred a loss for the year ended 30 June 2015, no dividends were declared for that year. The options were exercisable between 1 March 2016 and 30 April 2016. Each option allowed the holder to buy one A ordinary share for $4.50. The following transactions and events occurred during the year ended 30 June 2016: 2015 July 25: The directors made the final call of $1 on the preference shares. Aug. 31: All call monies were received except those owing on 7,500 preference shares. Sept. 7: The directors resolved to forfeit 7,500 preference shares for non-payment of the call. The constitution of the company directs that forfeited amounts are not to be refunded to shareholders. The shares will not be reissued. Nov. 1: The company issued a prospectus offering 30,000 B ordinary shares payable in two instalments: $3 on application and $2 on 30 November 2015. The offer closed on 30 November. Nov. 30: Applications for 40,000 B ordinary shares were received. Dec. 1: The directors resolved to allot the B ordinary shares pro rata with all applicants receiving 75% of the shares applied for. Excess application monies were allowed to be held. The shares were duly allotted. Dec. 5: Share issue costs of $5,200 were paid.

2016 April 30: The holders of 15,000 options applied to purchase shares. All monies were sent with the applications. All remaining options lapsed. The shares were duly issued.

Required: (a) Prepare general journal entries to record the above transactions for Britain Ltd (b) Briefly explain the difference between INCOME and REVENUE. (c) Briefly explain the FIVE steps of Revenue recognition as discussed in NZ IFRS 15.