Olive Ltd’s equity at 30 June 2016 was as follows: 400 000 ordinary shares, issu
ID: 2462043 • Letter: O
Question
Olive Ltd’s equity at 30 June 2016 was as follows:
400 000 ordinary shares, issued at $1.60, fully paid
500 000 ordinary shares, issued at $2, called to $1.20
180 000 redeemable preference shares, issued at $1, fully paid
Calls in advance (10 000 ordinary shares)
Share issue costs
General reserve
Retained earnings
$
640 000
600 000
180 000
8 000
(7 000)
60 000
310 000
The following events occurred during the year ended 30 June 2017:
2016
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 2017.
31
70 000 options were taken up by shareholders, for which all money due was received.
2017
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.
400 000 ordinary shares, issued at $1.60, fully paid
500 000 ordinary shares, issued at $2, called to $1.20
180 000 redeemable preference shares, issued at $1, fully paid
Calls in advance (10 000 ordinary shares)
Share issue costs
General reserve
Retained earnings
$
640 000
600 000
180 000
8 000
(7 000)
60 000
310 000
Explanation / Answer
OLIVE LTD
General Journal
2016
Jul 15 Call - Ordinary Dr 400 000
Share Capital - Ordinary Cr 400 000
(Final call of 80c per share on 500 000 ordinary shares)
Calls in Advance Dr 8 000
Call –Ordinary Cr 8 000
(Calls already received in advance cancelled against the call due)
Aug 31 Cash Dr 372 800
Call – Ordinary Cr 372 800
(Cash received on 466 000 ordinary shares)
Sep 10 Share Capital - Ordinary Dr 48 000
Call – Ordinary Cr 19 200
Forfeited Shares Reserve Cr 28 800
(Forfeiture of 24 000 ordinary shares for non-payment of 80c call, with the capital already paid in held as a reserve)
Oct 31 Cash Dr 56 000
Share Options Cr 56 000
(Issue of 70 000 options purchased at 80c each)
2017
Jan 31 Cash Trust Dr 200 000
Application – Ordinary Cr 200 000
(Cash trust money held on application for 100 000 ordinary shares @ $2 each)
Feb 5 Application – Ordinary Dr 200 000
Share Capital – Ordinary Cr 200 000
(Issue of 100 000 ordinary shares)
Cash Dr 200 000
Cash Trust Cr 200 000
(Transfer of cash)
Feb 5 Share Issue Costs/Share Capital Dr 6 700
Cash Cr 6 700
(Underwriting commission paid)
Feb 18 Share Capital – Preference Dr 180 000
Retained Earnings Dr 10 800
Shareholders Redemption Cr 190 800
(Redemption of 180 000 preference shares at $1.06 per share, out of the proceeds received from issue of ordinary shares)
Feb 26 Shareholders’ Redemption Dr 190 800
Cash Cr 190 800
(Payment to redeem preference shares)
Apr 15 Cash Dr 78 000
Share Capital – Ordinary Cr 78 000
(Issue of 52 000 ordinary shares @ $1.50 as a result of options exercised)
Share Options Dr 56 000
Share Capital – Ordinary Cr 41 600
Lapsed Options Reserve Cr 14 400
(Write-off of share options @ 80c, with 52 000 being exercised and 18 000 lapsing)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.