Question
The equity of Luxury Resort Ltd on 1 July 2020 consisted of the following. 560000 ordinary shares, issued at $2.40 each and called to $2.40
The equity of Luxury Resort Ltd on 1 July 2020 consisted of the following.
560000 ordinary shares, issued at $2.40 each and called to $2.40 | $1 344000 |
Calls in arrears (48000 shares 80c) | (38 400) |
General reserve | 580000 |
Retained earnings | 53780 |
Prepare general journal entries to record the following transactions relating to share issues and options for the year ending 30 June 2021.
- On 17 July 2020, the directors forfeited the shares on which the call was outstanding. Forfeited shares are not to be reissued and the companys constitution requires that any forfeited amounts be refunded to the former shareholders. Refund cheques were sent on 28 July 2020. Any outstanding dividends were still payable to former shareholders.
- On 1 August 2020, a rights offer (offering 5% preference shares at an issue price of $2.80 per share) was made to existing shareholders on the basis of one preference share for every two ordinary shares held. Shares were payable in full on allotment and rights were renounceable. The issue was underwritten for a fee of $10 000.
The rights offer closed undersubscribed on 31 August 2020, and rights in respect of 80000 shares were transferred to the underwriter. On 1 September 2020, the shares were allotted. The underwriter paid for its allotment of shares, net of its fee, on 10 September 2020. All other monies were received by 21 September 2020.
- On 1 March 2020, the directors offered for sale 200000 options at 10c each. Each option gave the holder the right to purchase one ordinary share for $2.80 each. Options were exercisable between 1 April 2022 and 30 June 2022. The option offer closed with 160000 applications being received. Options were duly allotted on 2 April 2021.
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