Accounting for share issues
On 1 February 2017, Beach Supplies Ltd was registered and issued a prospectus inviting applications for 2,000,000 shares, at an issue price of $3.50, payable as follows:
$1.00 on application
$1.50 on allotment (payment due within 1 month of allotment)
$0.60 on first call
$0.40 on final call
The issue is underwritten at a commission of $30,000.
By 28 February 2017, applications had been received for 1,900,000 shares. On 3 March, shares are allotted, and the underwriter forwarded the application and allotment money due on the 100,000 shares less their commission. All remaining allotment money is received by 3 April. Legal costs re company formation are $5,000 and are paid on 5 April. Share issue costs of $3,000 are also paid on the same date.
The first call is made on 10 April 2017, with money due by 10 May 2017. The final call is made on 15 May 2017, with money due by 15 June 2017. All money owing in relation to the two calls is received by the due dates except for the holders of 40,000 shares who did not pay either call, and the holder of another 10,000 shares who did not pay the second call. On 20 June 2017, as provided in the company’s constitution, the directors forfeited these 50,000 shares.
On 25 June 2017, the forfeited shares are reissued as fully paid for a consideration of $3.10 per share.
Costs of forfeiture and reissue amounted to $10,000, and are paid. The constitution allows for the refund of any balance in the forfeited shares account after reissue to former shareholders, so refunds were made on 30 June 2017.
Required:
Prepare the journal entries to record the transactions of Beach Supplies Ltd up to and including that which took place on 30 June 2017. Show all relevant dates, narrations and workings.
Revaluation of property, plant and equipment
Sunshine Ltd reported the following information for plant and equipment in its statement of financial position at 1 July 2016:
| $ | |
| Plant and equipment – at cost | 1,000,000 |
| Less: accumulated depreciation | (305,000) |
| 695,000 |
The records of Sunshine Ltd as at 1 July 2016 showed that the plant and equipment consisted of two items:
| Plant X | Plant Y | |
| $ | $ | |
| Cost | 800,000 | 200,000 |
| Carrying amount | 575,000 | 120,000 |
Both items of plant are depreciated on a straight-line basis over 10 years. Plant X has an estimated residual value of $50,000, and Plant Y has an estimated residual value of nil.
On 1 July 2017, the directors of Sunshine Ltd decide to change from the cost model to the revaluation model. The following information applies:
| 1 July 2017 | 1 July 2018 | |||
| Plant X | Plant Y | Plant X | Plant Y | |
| Fair value | $460,000 | $110,000 | $410,000 | $90,000 |
| Remaining useful life | 6 years | 5 years | 5 years | 4 years |
| Estimated residual value | $40, 000 | nil | 40,000 | nil |
Assume a tax rate of 30%.
Required:
Prepare all relevant journal entries for Sunshine Ltd’s plant and equipment for the period 1 July 2016 to 30 June 2019 (including entries for depreciation and all necessary revaluation entries). Show narrations and all relevant workings.
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