Question

Jenny Ltd’s equity at 30 June 2019 was as follows:

200 000 ordinary shares, issued at $3.20, fully paid 250 000 ordinary shares, issued at $4, called to $2.40 180 000 redeemable preference shares, issued at $1, fully paid Calls in advance (5 000 ordinary shares) Share issue costs General reserve Retained earnings

$640 000 600 000 180 000 8 000 (7 000) 60 000 310 000

The following events occurred during the year ended 30 June 2019:

2018
July	15		The final call, due 31 August, was made on the partly paid shares.
Aug.	31		All call money was received, except for that due on 12 000 shares.
Sept.	10		In accordance with the constitution, the shares on which the call was unpaid were forfeited. The company is entitled to keep any balance from forfeiture of shares.
Oct.	1		The company offered ordinary shareholders 1 option (at a price of $0.80 per option) for every 5 shares held. Each option entitled the holder to buy 1 ordinary share at a price of $1.50 per share, exercisable on or before 15 April 2017.
	31		35 000 options were taken up by shareholders, for which all money due was received.
2019
Jan.	3	A prospectus was issued, inviting applications for 100 000 ordinary shares at an issue price of $2, payable in full on application. The purpose of the issue was to fund the redemption of the preference shares. The issue was underwritten at a commission of $6 700.
	31	The issue closed fully subscribed, with all money due having been received.
Feb.	5	The 100 000 shares were allotted, and the underwriting commission was paid.
	18	The directors resolved to redeem the preference shares out of the proceeds of the January share issue for $1.06 per share.
	26	Cheques were issued to the preference shareholders.
April	15	26 000 shares were issued as a result of 26 000 options having been exercised, for which money had been received. The unexercised options lapsed.

Required:

Prepare general journal entries to record the above transactions.

Answer 1

We have attached the snapshot of solution

$ 28,000.00 31-Oct-18 Bank A/C dr. To Share option A/C (Being 35000 option taken by shareholders @ $ 0.80 per Shares $ 28,000.00 $ 2,00,000.00 31-Jan-19 Bank a/c Dr. To shares application a/c (Being amount recived from 200000 Shares issues @ $2) $ 2,00,000.00 $ 2,00,000.00 05-Feb-19 Shares Application A/c dr. To Share Capital accounts (Amount received is trasnferred to Share capital accounts $ 2,00,000.00 $ 6,700.00 05-Feb-19 Underwriting comminsion A/c Dr. To Bank (Being underwriting comission paid) $ 6,700.00 $ 1,80,000.00 $ 10,800.00 18-Feb-19 Preference Share Capital A/c Dr. Premium on Redemption on Preference Shares A/c Dr. To Preference Share Holders A/C |(Being Perfernce shares Redemmed at Preimum from the proceed of issue of ordinary share capital) $ 1,90,800.00

Further we understand that there is inadvertent error in question in relation to date of balance sheet , it should be as on 30th June 2019

Excercise date of option should be 15th April 2019
Given Information in question Particulars Ordinary Shares (Type A) Ordinary Shares (Type B) Redemable Prefernce Shares Call in advance @ $1.6 per shares Share Issue Cost General Reserve Retained Earning No. of Shares Fully Paid ($) Partly Paid ($) Amount Explanation 2,00,000 $3.20 $6,40,000 2,50,000 $2.40 $6,00,000 1,80,000 $1.00 $1,80,000 5,000 $ 8,000 Calculation -- ( 8000/5000 )= $1.6 Per shares is call in advance amount $ -7,000 $ 60,000 $ 3,10,000

Journal Entries Credit Debit $ 4,00,000.00 Date Particulars 15-Jul-18 Share Final call A/c Dr. To Shares Capital accounts (Amount due of $ 1.6 per shares from shareholder of ordinary share type B) Calculation - 250000* $1.6 $ 4,00,000.00 $ 3,72,800.00 31-Aug-18 Bank A/c Dr. To Share Final Call Accounts (Amount received from 233000 shares @ $1.6) $ 4,00,000.00 $ 8,000.00 31-Aug-18 Call in advance A/c Dr. To Share Final Call Accounts (8000 Shares call in advance transferred to Share Final Call accounts $ 8,000.00 $ 19,200.00 31-Aug-18 Call In arrers A/C Dr. To Share Final Call Accounts |(12000 shares * $1.6 amount is not received from Shareholders) $ 19,200.00 $ 48,000.00 10-Sep-18 Share Capital Account Dr. To forfieted Shares Accoount To Call in arrers A/C |(12000 shares for which final call is not received are forfieted) $ $ 28,800.00 19,200.00

$ 1,90,800.00 26-Feb-19 Preference Shareholders A/c Dr. To Bank A/C (Being Amount paid on Redemption of prefence Shares $ 1,90,800.00 $ 10,800.00 26-Feb-19 General Reserve A/c Dr. | To Premium on Redemption on Preference Shares A/C (Premium on Redemption on Preference Shares Charged to General Reserve) $ 10,800.00 39000 39000 15-Apr-19 Bank a/c Dr To Share capital a/c (Being 26000 Shares issued @ $1.5 Per share as a part of option scheme launched by company on 1st Oct 2018. 28000 20800 7200 30-Jun-19 Share option A/C To General Reserve A/c (26000* $ 0.8) To Profit & Loss A/C (Retained Earining) (9000* $ 0.8) (Being Shares option Earning Trasnfered to General Reseve for 26000 Shares Option Excercised by existing Shareholder and for remainng 9000 lapsed Share option earning is transferred to profit Loss A/C)

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Given Information in question Particulars Ordinary Shares (Type A) Ordinary Shares (Type B) Redemable Prefernce Shares Call in advance @ $1.6 per shares Share Issue Cost General Reserve Retained Earning No. of Shares Fully Paid ($) Partly Paid ($) Amount Explanation 2,00,000 $3.20 $6,40,000 2,50,000 $2.40 $6,00,000 1,80,000 $1.00 $1,80,000 5,000 $ 8,000 Calculation -- ( 8000/5000 )= $1.6 Per shares is call in advance amount $ -7,000 $ 60,000 $ 3,10,000

Journal Entries Credit Debit $ 4,00,000.00 Date Particulars 15-Jul-18 Share Final call A/c Dr. To Shares Capital accounts (Amount due of $ 1.6 per shares from shareholder of ordinary share type B) Calculation - 250000* $1.6 $ 4,00,000.00 $ 3,72,800.00 31-Aug-18 Bank A/c Dr. To Share Final Call Accounts (Amount received from 233000 shares @ $1.6) $ 4,00,000.00 $ 8,000.00 31-Aug-18 Call in advance A/c Dr. To Share Final Call Accounts (8000 Shares call in advance transferred to Share Final Call accounts $ 8,000.00 $ 19,200.00 31-Aug-18 Call In arrers A/C Dr. To Share Final Call Accounts |(12000 shares * $1.6 amount is not received from Shareholders) $ 19,200.00 $ 48,000.00 10-Sep-18 Share Capital Account Dr. To forfieted Shares Accoount To Call in arrers A/C |(12000 shares for which final call is not received are forfieted) $ $ 28,800.00 19,200.00

$ 1,90,800.00 26-Feb-19 Preference Shareholders A/c Dr. To Bank A/C (Being Amount paid on Redemption of prefence Shares $ 1,90,800.00 $ 10,800.00 26-Feb-19 General Reserve A/c Dr. | To Premium on Redemption on Preference Shares A/C (Premium on Redemption on Preference Shares Charged to General Reserve) $ 10,800.00 39000 39000 15-Apr-19 Bank a/c Dr To Share capital a/c (Being 26000 Shares issued @ $1.5 Per share as a part of option scheme launched by company on 1st Oct 2018. 28000 20800 7200 30-Jun-19 Share option A/C To General Reserve A/c (26000* $ 0.8) To Profit & Loss A/C (Retained Earining) (9000* $ 0.8) (Being Shares option Earning Trasnfered to General Reseve for 26000 Shares Option Excercised by existing Shareholder and for remainng 9000 lapsed Share option earning is transferred to profit Loss A/C)