Question

Question 2 [15 marks]

Topic 4: Accounting for equity

Victoria Ltd was incorporated on 1 September 2018 and its constitution states that the company can issue the following shares:

▪ 3,000,000 ordinary shares; and ▪ 1,000,000 preference shares (non-voting)

The following events took place during the financial year ended 30 June 2019.

13 September

Issued a prospectus inviting the public to subscribe for 1,500,000 ordinary shares at an issue price of $3.50 each, with $2 due on application, $1 due within one month of allotment and the balance of $0.50 to be paid by 10 January 2019.

12 October Applications closed with the share issue being oversubscribed by 250,000 shares.

20 October Directors allotted the 1,500,000 shares on a pro rata basis and the amounts received in excess were credited against the amount due on allotment.

20 November All outstanding allotment money was received.

10 January

All monies were received for the final call except for the holders of 25,000 shares.

17 January The directors decided to forfeit the 25,000 shares of the defaulting shareholders.

22 January The forfeited shares were resold for $2.80 per share as fully paid. Share reissue costs amounted to $7,500. The defaulting shareholders incurred all costs of the reissue and any surplus was refunded to them.

Required:

Provide the journal entries necessary to account for the above transactions and events for the year ended 30 June 2019. Show all relevant dates and narrations.

Important tips:

• Show all journal entries in chronological order, with dates stated clearly.

• In preparing your journal entries, you should include brief narrations and relevant workings to support your figures.

Answer 1

Date	Particulars	type	Debit amount	Credit amount	Working
12-Oct	Bank A/c	Debit	$       3,500,000		(1500000+250000)*2
	Share application A/c	Credit		$      3,500,000	(1500000+250000)*2
	(Share application money received)
20-Oct	Share application A/c	Debit	$       3,500,000
	Share capital A/c	Credit		$      3,000,000	1500000*2
	Share allotment A/c	Credit		$         500,000	250000*2
	(share alloted and excess money transferred to allotment)
20-Nov	Bank A/c	Debit	$       1,000,000		1500000*1-500000
	Share allotment A/c	Credit		$      1,000,000	1500000*1-500000
	(balance due rceived on allotment)
20-Nov	Share allotment A/c	Debit	$       1,500,000		1000000+500000
	Share capital A/c	Credit		$      1,500,000	1000000+500000
	(amount received on allotment transferred to share capital A/c)
10-Jan	Bank A/c	Debit	$          737,500		(1500000-25000)*0.5
	Calls in arrear A/c	Debit	$            12,500		25000*0.5
	Share final call	Credit		$         750,000
	(Share final call received)
	Share final call	Debit	$          750,000
	Share capital	Credit		$         750,000
	(amount received on final transferred to share capital A/c)
17-Jan	Share capital A/c	Debit	$            87,500		25000*(2+1+0.5)
	Share forfeiture A/c	Credit		$           75,000	25000*(2+1)
	Calls in arrear A/c	Credit		$           12,500
	(shares forfeited)
22-Jan	Bank A/c	Debit	$            70,000		25000*(2.8)
	Share forfeiture	Debit	$            17,500		Balancing figure 87500-70000
	Share capital A/c	Credit		$           87,500	25000*(3.5)
	(shares reissued as fully paid up)
22-Jan	Share issue costs	Debit	$               7,500
	Bank A/c	Credit		$             7,500
	(share reissue costs paid)
22-Jan	Share forfeiture	Debit	$               7,500
	Share issue costs	Credit		$             7,500
	(sare reissue costs borne by defaulters)
22-Jan	Share forfeiture	Debit	$            50,000		(75000-17500-7500)
	Bank A/c	Credit		$           50,000	(75000-17500-7500)
	(EXCESS MONEY REFUNDED)

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