The equity balances for Acacia Ltd at the 1 July 2018 comprised the following: S
ID: 2469629 • Letter: T
Question
The equity balances for Acacia Ltd at the 1 July 2018 comprised the following:
Share capital
$2 988 000
(All ordinary shares, issued and paid to $5, less issue costs of $12 000)
Retained earnings
$7 600 400
$10 588 400
On 1 October 2018, Acacia Ltd issued a prospectus for applications for 200 000 ordinary shares to the public at an issue price of $7, payable $2.50 on application, $1.50 on allotment and the remaining $3 in future call(s) as determined by the directors.
By 1 December applications had been received for 240 000 ordinary shares with $2.50 attached.
At a directors’ meeting on 5 December, it was decided to reject applications for 40 000 shares and issue shares to the remaining applicants.
Share issue costs of $4000 were paid on 5 December. All outstanding allotment money was received by the 1 January 2019.
The first call for $2 was made on 1 February 2019 with all money received by 20 February. The final call for $1 was made on 20 June 2019. At 30 June 2019 this call money had not been received in relation to 25 000 shares.
Required
A. Prepare the journal entries to record the transactions of Acacia Ltd as outlined above. (Show all workings.)
B. Calculate the amount of share capital in the statement of financial position of Acacia Ltd as at 30 June 2019 (Show all workings.)
C. How would your answers to requirements A and B change if:
By 1 December applications had been received for 240 000 ordinary shares of which applicants for 80 000 shares forwarded $4 per share, and the remainder paying only the application money.
At a directors’ meeting on 5 December, it was decided to allot shares applicants who had paid $4, and to reject applications for 40 000 shares where applicants had only forwarded $2.50 on application. According to the company’s constitution, all surplus money from application can be transferred to Allotment and/or Call accounts
Share capital
$2 988 000
(All ordinary shares, issued and paid to $5, less issue costs of $12 000)
Retained earnings
$7 600 400
$10 588 400
Explanation / Answer
Date Acconts Title Dr in $ Cr In $ 2018 1-Dec Cash Trust 600000 Application (240000*2.5) 600000 (being application money received) 5-Dec Application (200000*2.5) 500000 Allotment (200000*1.5) 300000 Share Capital 800000 ( Shares Issued) Application 100000 Cash Trust 100000 (being application rejected) Share Capital 4000 Cash 4000 (Being share issue cost paid) Cash 500000 Cash Trust 500000 (Transfer of application money) 2019 1-Jan Cash 300000 Allotment 300000 (Being received of allotment money) 1-Feb Call (200000*2) 400000 Share Capital 400000 (Being first call made) 20-Feb Cash (200000*2) 400000 Call 400000 (Being cash received for call money) 20-Jun Final Call (200000*1) 200000 Share Capital 200000 (Being final Call made) 175000 30-Jun Cash 175000 Final Call (being cash received) 2) The amount of share capital on 30 th June 2019 Beginning Balance $2,988,000 Add: New Shares issued (200000*7) 1400000 Less: share Issue Cost -4000 Less: calls in arrears -25000 Balance $4,359,000 3) The following are the changes, there is no change in call money and amount of share capital 1-Dec Cash Trust Application (80000*$4+160000*2.5) 720000 (being application money received) 720000 5-Dec Application (200000*2.5) 500000 Allotment (200000*1.5) 300000 Share Capital 800000 ( Shares Issued) Application 120000 Allotment 120000 (transfer of allotment money which was recived on application) Application 100000 Cash Trust 100000 (being application rejected) Share Capital 4000 Cash 4000 (Being share issue cost paid) Cash 620000 Cash Trust 620000 (Transfer of application money) 2019 Cash 180000 Allotment 180000 (Being amount of money received on allotment)
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