ARGAN NL General Journal 2017 Share Capital Dr 2 000 000 Call Cr 500 000

Argan nl general journal 2017 share capital dr 2 000

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ARGAN NL General Journal 2017 Share Capital Dr 2 000 000 Call Cr 500 000 Forfeited Shares Liability Cr 1 500 000 (Forfeiture of 1 000 000 shares called to $2 for non-payment of 50c call) 1 Nov Cash Dr 1 800 000 Forfeited Shares Liability Dr 200 000 Share Capital Cr 2 000 000 (Reissue of forfeited shares at public auction for $1.80, paid to $2) Forfeited Shares Liability Dr 4 000 Cash Cr 4 000
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6 (Expenses of forfeiture and reissue) Forfeited Shares Liability Dr 1 296 000 Cash Cr 1 296 000 (Refund to former shareholders) Question 2.10 Issue by instalments, oversubscription, forfeiture and reissue On 1 April 2016, Magnolia Ltd was incorporated and a prospectus was issued inviting applications for 100 000 shares, at an issue price of $10, payable $5 on application, $2.50 on allotment and $1.25 on each of two calls to be made at intervals of 4 months after the date of allotment. By 30 April, applications were received for 120 000 shares. On 3 May, the directors allotted 100 000 ordinary shares to the applicants in proportion to the number of shares for which applications had been made. The surplus application money was offset against the amount payable on allotment. The balance of the allotment money was received by 10 May. Legal costs of forming the company were $1300 and were paid on 11 May. Share issue costs of $800 were also paid on the same date. The two calls were made on the dates stated in the prospectus, but the holders of 10 000 shares did not pay either call. In addition, a holder of another 5000 shares did not pay the second call. On 10 March 2017, as provided by the company’s constitution, the directors forfeited the 15 000 shares on which calls were unpaid. On 25 March 2017, the forfeited shares were reissued as fully paid for a consideration of $9 per share. Costs of forfeiture and reissue amounted to $250. The constitution does not provide for refund of any balance in the forfeited shares account after reissue to former shareholders. Required A. Prepare ledger accounts to record the above transactions. B. Prepare the equity section of Magnolia’s statement of financial position on completion of the transactions. MAGNOLIA LTD General Ledger Cash Trust 30/4/16 Application 600 000 3/5/16 Cash 600 000 Application 3/5/16 Share capital 500 000 30/4/16 Cash Trust 600 000 3/5/16 Allotment 100 000 600 000 600 000
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7 Allotment 3/5/16 Share capital 250 000 3/5/16 Application 100 000 10/5/16 Cash 150 000 250 000 250 000 Share Capital 10/3/17 Calls & Forfeited 3/5/16 Applic. & allot 750 000 Shares Reserve 150 000 3/9/16 First call 125 000 25/3/17 Balance c/d 1 000 000 3/1/17 Second call 125 000 25/3/17 Cash & Forfeited Shares Reserve 150 000 1 150 000 1 150 000 25/3/17 Balance b/d 1 000 000 Cash 3/5/16 Cash Trust 600 000 11/5/16 Formation Costs Exp 1 300 10/5/16 Allotment 150 000 11/5/16 Share Issue Costs 800 --/9/16 First Call 112 500 25/3/17 Forfeited Shares Reserve 250 25/1/17 Second Call 106 250 25/3/17 Balance c/d 1 101 400 25/3/17 Share Capital 135 000 1 103 750 1 103 750 25/3/17 Balance b/d 1 101 400 Formation Costs Expense 11/5/16 Cash 1 300 P&L 1 300 Share Issue Costs 11/5/16 Cash 800 First Call 3/9/16 Share Capital 125 000 --/9/16 Cash 112 500 10/3/16 Share Capital 12 500 125 000 125 000 Second Call 3/1/17 Share Capital 125 000 --/1/17 Cash 106 250 10/3/17 Share Capital 18 750 125 000
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