Question

INSTITUTE Week 3 RCK Ltd issues a prospectus inviting the public to subscribe for 90 million ordinary shares of $2.00 each. The terms of the issue are that $1.00 is to be paid on application and the remaining $1.00 within one month of allotment. Applications are received for 108 million shares during July 2018. The directors allot 90 million shares on 15 August 2018. All applicants receive shares on a pro rata basis. The amounts payable on allotment are due by 20 September 2018. By 20 September 2018 the holders of 18 million shares have failed to pay the amounts due on allotment. The directors forfeit the shares on 30 September 2018 The shares are resold on 15 October 2018 as fully paid. An amount of $2.00 per share is received. The balance of forfeited shares is refunded on 20 October 2018. Required: Provide the journal entries necessary to account for the above transactions and events.

Answer 1

Journal entries
Particulars	Dr/ Cr	Amt $ in million	Amt $ in million
Bank (108 million shares @ $1)	Dr	108
To share application	Cr		108
Share application	Dr	108
To Share capital (90*1)	Cr		90
To Bank (108-90)*1	Cr		18
Share allotment (90*1)	Dr	90
To share capital	Cr		90
Bank (90-18)*1	Dr	72
To share allotment	Cr		72
Share capital (18*2)	Dr	36
To Share allotment	Cr		18
To Forfeited share	Cr		18
Bank (18*1)	Dr	18
Forfeited share	Dr	18
To Share capital (18*2)	Cr		36
Forfeited share	Dr	18
To Capital reserve	Cr		18