Question

QUESTION 4 Spice Ltd makes an offer to the general public of 10 million shares at an issue price of $5.00. Spice Ltd requires a $2.50 per share payment on application. Another $2.50 is to be paid as a call at a future date to be determined by the board of directors. On application money was received on 12 July for exactly 10 million shares and shares were allotted on that date. On 28 July, 9.5 million shareholders paid their call moneys. The 500,000 forfeited shares were all successfully auctioned for $4.50 per share. The journal to record the forfeiture of the shares is: DR Cash 2,250,000 DR Forfeited Shares Account 250,000 CR Share Capital 2,500,000 DR Share Capital 2,500,000 CR Call 1,250,000 CR Forfeited Shares Account 1,250,000 DR Share Capital 1,250,000 DR Application 1,250,000 CR Call 1,250,000 CR Forfeited Shares Account 1,250,000 DR Share Capital 2,500,000 CR Forfeited Shares Account 2,500,000

Answer 1

Journal entries to record the forfeiture of share. Solution: Share Capital AK -DF (500000x5) 2500000 To Call - pn-arrear AIC (500000X 2-5) To Share forfeiture A/C (500000x2-5) 500000 Share are forfeited) 1250000 1250000 (Being Dr Share capital 2500 000 call 1250000 cr Ans Cr Forfeited Shares Account 1250000

Note: For The 500 000 Share Share capital face value are $5.00 (issue price) and $2.50 paid at the time of application money call-in-arrear = $ 5.00 $ 2-50 = $ 2.50 And Application money i-e $2.50 are used for the Calculatton of forfeited Share ;. Shave forfeiture 500000 X2.50 = 1250000