Question 2.10Issue by instalments, oversubscription, forfeiture and reissue

On 1 April 2016, Magnolia Ltd was incorporated and a prospectus was issued inviting applications for 100000 shares, at an issue price of $10, payable $5 on application, $2.50 on allotment and $1.25 on each of two calls to be made at intervals of 4 months after the date of allotment.

By 30 April, applications were received for 120000 shares. On 3 May, the directors allotted 100000 ordinary shares to the applicants in proportion to the number of shares for which applications had been made. The surplus application money was offset against the amount payable on allotment. The balance of the allotment money was received by 10 May. Legal costs of forming the company were $1300 and were paid on 11 May. Share issue costs of $800 were also paid on the same date.

The two calls were made on the dates stated in the prospectus, but the holders of 10000 shares did not pay either call. In addition, a holder of another 5000 shares did not pay the second call.

On 10 March 2017, as provided by the company's constitution, the directors forfeited the 15000 shares on which calls were unpaid.

On 25 March 2017, the forfeited shares were reissued as fully paid for a consideration of $9 per share. Costs of forfeiture and reissue amounted to $250. The constitution does not provide for refund of any balance in the forfeited shares account after reissue to former shareholders.

Prepare General Journal accounts for the above transactions.