At 30 June 2016, the trial balance of Evergreen Ltd contained the following. EVE
ID: 2462777 • Letter: A
Question
At 30 June 2016, the trial balance of Evergreen Ltd contained the following.
EVERGREEN LTD
Trial Balance
as at 30 June 2016
Current assets
Plant and equipment (net)
Goodwill
Retained earnings
$
300 000
820 000
320 000
900 000
Accounts payable
10% unsecured notes
Share capital
$
340 000
500 000
80 000 preference shares issued at $10, paid to $5
1 100 000 ordinary shares issued at $2, paid to $1
400 000
1 100 000
$
2 340 000
$
2 340 000
After a number of years of unprofitable trading, the company underwent the following restructure to improve its financial position:
1. A call of $5 per share was made on the issued preference capital and a call of $1 on each of the ordinary shares. All call money was duly received.
2. The ordinary shareholders were given the following options:
• A rights issue of 1 ordinary share, at an issue price of $2, payable in full on application, for every 10 shares held.
• To apply for one $50 7% debenture for every 100 shares held. These were payable in full on application.
Holders of 600 000 shares chose the first option and holders of 500 000 shares chose the second option. All money was received when due.
Required
Prepare general journal entries to record the above events.
EVERGREEN LTD
Trial Balance
as at 30 June 2016
Current assets
Plant and equipment (net)
Goodwill
Retained earnings
$
300 000
820 000
320 000
900 000
Accounts payable
10% unsecured notes
Share capital
$
340 000
500 000
80 000 preference shares issued at $10, paid to $5
1 100 000 ordinary shares issued at $2, paid to $1
400 000
1 100 000
$
2 340 000
$
2 340 000
Explanation / Answer
Journal entries
(1) Bank A/c Dr.... 1500000
To preference share Capital a/c 400000
TO Ordinary Share Capital A/c 1100000
(2) Bank A/c dr..... 120000
To Ordinary share Capital 120000
(600000/10)*2
(3) bank A/c dr... 250000
To 7% Debenture 250000
(500000/100)*50
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