Question (Part 1):

On 1 August 2016, NBS Ltd was incorporated and a prospectus was issued inviting applications for 250 000 ordinary shares to the public at an issue price of $12, payable as follows:


$4 on application (due by closing date of 1 October)

$5 on allotment (due 1 November)

$3 on final call/calls (to be determined by the directors)


By 1 October, applications had been received for 350 000 ordinary shares of which applicants for 50 000 shares forwarded the full $12 per share, applicants for 100 000 shares forwarded $9 per share and the remainder forwarded only the application money.

At to directors’ meeting on 7 October, it was decided to allot shares in full to applicants who had paid the either $12 or $9 on application, to reject applications for 20 000 shares and to proportionally allocate shares to all remaining applicants. According to the company’s constitution, all surplus money from application can be transferred to Allotment and/or Call accounts. All outstanding allotment money was received by the due date. Legal costs of forming the company were $1300 and were paid on 11 October. Share issue costs of $10 000 were also paid on the same date.


Prepare general journal entries to record the above transactions of NBS Ltd. Narrations are not required.


Question (Part 2):  


At 30 June 2018, the equity of NBS Ltd consisted of the following:

50 000 preference shares issued at S10, paid to $5          250 000

250 000 ordinary shares issued at $12, paid to $9           2 250 000

Share issue costs                                                                (10 000)

Call in advance                                                                   150 000

Retained earnings                                                               1 600000

Total equity                                                              $        1 040 000


After a number of years of unprofitable trading, the company decided to undergo some restructure to improve its financial position. The following transactions occurred in 2018-2019 financial year:

1)       A final call for $3 was made on all ordinary shares on 1 July 2018 with money due by 31 July. All money was received by the due date except that the holders of 15 000 shams did not pay.

2)       On 10 August 2018, as provided by the company’s constitution, the directors forfeited the 15 000 shares on which calls were unpaid.

3)       On 1 September 2018, the forfeited shares were reissued as fully paid for a consideration of $10 per share. Costs of forfeiture and reissue amounted to 800. The constitution does not provide for refund of any balance in the forfeited shares account after reissue to former shareholders.

4)       On 1 October, A call of $5 per share was made on the issued preference shares. All call money was received by 31 October.

5)       On 1 November 2018, a 1-for-10 rights issue was made to all existing ordinary shareholders at an issue price of $10 per share. All rights were exercised by the expiry date 30 November.

6)       On 1 December 2018, an offer was made to all existing ordinary shareholders to apply for one $100 7% debenture for every 100 shares held. Applications and money were received from holders of 100 000 share by 20 December.

7)       On 28 June 2019, the directors determined that a final dividend of $125 000 from retained earnings would be paid following the AGM.


  1. Prepare general journal entries to record the above transactions of NBS Ltd. Narrations are not required.
  2. Assuming that there were no other transactions, complete the equity section as at 30 June 2019 by filling in the blanks.


At 30 June 2019, the equity of NBS Ltd consisted of the following:

50 000 preference shares issued at $ 10,                                         $_________

250 000 ordinary shares issued at $ 12,                                           $_________

          ordinary shares issued at­­ $___,________                                $_________

Share issue costs                                                                         $_________

Call in advance                                                                            $_________

Forfeited share reserve                                                                $_________

Retained earnings                                                                        (1 600 000)

Total equity                                                                       $_______           __


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