Question 1: Shares
Milestone Ltd’s equity at 30 June 2019 was as follows:
400 000 ordinary shares, issued at $1.60, fully paid $ 640 000
500 000 ordinary shares, issued at $2, called to $1.20 600 000
180 000 redeemable preference shares, issued at $1, fully paid 180 000
Calls in advance (10 000 ordinary shares) 8 000
Share issue costs (7 000)
General reserve 60 000
Retained earnings 310 000
The following events occurred during the year ended 30 June 2020:
| 2019 | |||
| 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 24 000 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 80 cents 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 2020. | |
| 31 | 70 000 options were taken up by shareholders, for which all money due was received. | ||
| 2020 | |||
| 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 $6700. | |
| 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 | 52 000 shares were issued as a result of 52 000 options having been exercised, for which money had been received. The unexercised options lapsed. |
Required:
Prepare general journal entries to record the above transactions.
Question 2: Shares
The equity of Foresters Ltd at 30 June 2019 consisted of:
| Share capital:
200 000 10% cumulative pref. shares issued at $2, fully paid 100 000 ordinary shares issued at $1, paid to 50c General reserve Retained earnings |
$400 000 50 000 40 000 860 000 |
The following transactions occurred during the year ended 30 June 2020:
| 2019
June
|
30
|
Already deducted from the retained earnings balance of $860 000 were final ordinary dividends of $7000 and preference dividends of $40 000 that had been declared at 30 June 2019. These dividends were expected to be paid later in 2019. |
|
| July | 9 | Final call made on 100 000 partly paid ordinary shares. | |
| Sept. | 19
|
Call money received. | |
| Oct. | 5
21
22 |
Final dividends paid.
Revaluation of an item of land upwards by $50 000. (This is the initial revaluation of land. Ignore taxation.) With the surplus created from the revaluation of land, the directors made a bonus issue of ordinary shares to existing ordinary shareholders, on the basis of 3 shares for every 10 shares, valued at $1.08 per share. |
|
| 2020
Jan. June |
10 30 |
Interim dividend of 6c per ordinary share paid out of retained earnings. Preference dividend for the year and final ordinary dividend of 6c per share were declared. Transfer of $3000 to the general reserve from retained earnings. |
Required:
Prepare ledger accounts to reflect the above transactions.
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