Question

Riverbed Corporation had the following shareholders’ equity on December 31, 2019:

Common shares, 1,320,000 shares authorized, issued and outstanding		$7,920,000
Contributed surplus (Common Shares)		81,000
Retained earnings		10,500,000
Total shareholders’ equity		$18,501,000

The following transactions occurred, in the order given, during 2020:

(a)		1,210 subscriptions were sold for common shares. Each subscription entitled the purchaser to purchase 10 shares in the company at a price of $8 per share. According to the subscriptions contracts, a payment of $17 per subscription was required at the time the subscriptions were sold.
(b)		As per the subscription contracts, the second payment was for the balance of the subscription price. Of the 1,210 subscribers, 120 defaulted and did not make this second payment.
(c)		The subscription contracts specify that, in the event of default, the first payment will not be refunded to defaulting subscribers. Also at this time, common shares are issued to subscribers that have fully paid on the contract.
(d)		Riverbed repurchased and cancelled 62,000 common shares at a cost of $4 per share.
(e)		A cash dividend of $0.50 per share was declared. The date of record was after all of the events above.

Prepare the journal entries to record the above transactions for Riverbed Corporation for 2020.

(a)

(b)

(c)

(d)

(e)

Answer 1

	In the books of Riverbed Corporation
	Journal                                        (value in $)
Qn	Particulars	Debit	Credit
a.	Bank account                                                                                                     Dr	20,570
	To Application money received a/c		20,570
	(Being application money of subscription for $17 each received from 1210 Subscriptions for 12100 shares)
	Application money received a/c a/c                                                       Dr	20,570
	To Share capital		20,570
	(Being amount received as application money of subscription, transferred to Share capital account)
b.	Share allotment a/c                                                                                      Dr	76,230
	To Share capital		52,030
	To Securities Premium		24,200
	( Being allotment money due on 1210 subscriptions @ $63 each (ie.10 shares*$8- $17) for 12100 shares)
	Bank account                                                                                                    Dr	68,670
	To Share allotment account		68,670
	( Being allotment money received from 1090 subscriptions (ie. 1210-120))
C.	Share capital                                                                                                   Dr	7,200
	Securities Premium                                                                                     Dr	2,400
	To Share allotment account		7,560
	To Forfeiture account		2,040
	(Being 120 subscriptions forfeited due to non-payment of remaining cash for allotment)
	Share Forfeiture account                                                                          Dr	2,040
	To Capital Reserve a/c		2,040
	(Being forfeitured subscriptions money transferred to capital reserve account)
d	Share capital                                                                                                   Dr	372,000
	To Bank		248,000
	To Capital Reserve a/c		124,000
	( Being 62000 shares repurchased for $4 each and cancelled)
e	Dividend Paid                                                                                                Dr	634,450
	To Shareholders account		634,450
	(Being dividend declared for $0.50 each to 1268900 shares)
Note 1	Value Per Share	$
a	Share Capital as on 31.12.2019	7920000
b	No. of shares	1320000
c	Value per share (a / b)	6
Note 2	No.of shares outstanding at the time of dividend
a.	Shares outstanding as at 31.12.2019	1320000
b.	Additional Shares issued (1210 subscription - 120 subscription)*10	10900
c.	Cancelled Shares	62000
d.	No.of shares outstanding at the time of dividend (a+b-c)	1268900