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Scenario 1 June 1 The directors issued a prospectus offering 40,000 ordinary shares at an issue price of $2.80, payable $2 on application and 80c

Scenario 1

June 1

The directors issued a prospectus offering 40,000 ordinary shares at an issue price of $2.80, payable $2 on application and 80c as a future call. The closing date for application was

31 September. The share issue was underwritten for a fee of $2,500, payable on 15 October.

September 31

Applications for 50,000 shares had been received.

October 10

The directors allotted the shares pro rata, with applicants receiving 80% of their requested shares. The companys constitution allows excess application monies to be retained and used to offset future calls payable.

Scenario 2

July 1

The company decided that 1,500,000 ordinary shares were to be offered to the public at an issue price of $3, payable as follows:

$1.50 on application (due 1 August)

$0.50 on allotment (due 30 August)

$1 on future calls

August 1

Applications had been received for 1,750,000 shares of which applicants for 300,000 shares forwarded the full $3 per share, the remainder paying only the application money.

August 5

At the directors meeting it was decided to allot ordinary shares in full to the applicants who paid the full amount and proportionally to all remaining applicants. According to the companys constitution, all surplus money from application can be transferred to Allotment and Call accounts.

August 30

All outstanding allotment money was received.

November 1

The final call on was made, with payment due by 28 November.

November 28

All money was received on the due date except for the holders of 50,000 shares who failed to meet the call.

Scenario 3

January 5

The directors resolved to redeem the preference shares (equity) out of the profit.

150,000 ordinary shares, issued at $1.50, paid to $1 $ 150,000

65,000 redeemable preference shares, issued at $1, fully paid $ 65,000

Maintenance reserve $ 200,000

Retained earnings $ 500,000

Scenario 4

February 8

As provided for in the constitution, the ordinary shares on which the call was unpaid were forfeited. The constitution in relation to this class of shares further provided for any surplus on resale, after satisfaction of unpaid calls and associated costs, to be returned to the former shareholders.

100,000 A ordinary shares, issued at $2, called to $1.80 $ 180,000

Less: Calls in Arrears - A ordinary shares $ (3,500)

120,000 B ordinary shares, issued at $1.50, called to $1 $ 120,000

250,000 5% preference shares, issued at $1, paid to $0.50 $ 125,000

100,000 $1 options $ 100,000

General reserve $ 250,000

Retained earnings $ 600,000

A ordinary shares - payable as follows:

$0.80 on application

$0.50 on allotment

$0.50 on 1st call

$0.20 on future calls

B ordinary shares - payable as follows:

$0.50 on application

$0.50 on allotment

$0.50 on future calls

February 20

The forfeited shares were re-issued to Melbourne Investments Ltd, as paid to $1.80 per share for $1.40 cash per share. Share issue cost amounted to $500.

February 21

The balance from forfeiture was returned to the former shareholders.

Required:

Prepare the general journal entries to record the above independent scenarios.

Narrations to general journal entries must be provided. (Note that narrations are not required in the examination).

Complete and detailed workings/calculations must be shown.

Absence of workings/calculations may lead to zero marks allocated to the particular general journal entry, despite the fact that the entry might be correct!

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