The terms of issue were as follows 3 on application 2 in one years time By 31

The terms of issue were as follows 3 on application 2

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The terms of issue were as follows: $3 on application. $2 in one years time By 31 January 2010, the company had received the $2 balance in respect of 90,000 shares. The holders of the other 10,000 shares declined to pay the call. Required : Prepare the journal entries to account for the issue of shares by ABC and the subsequent receipt of call monies. Issue of shares Deposit on application, balance on call 1 January 2009 Dr Cash 300,000 Cr Share capital 300,000 Issue of shares 1 January 2010 Dr Call 200 000 (100,000 shares x $3) 200,000 Cr Share capital 200,000 Call of $2 on 100,000 shares 1 31 January 2010 Dr Cash 180,000 Cr Call 180,000 Receipt of call money on 90,000 shares The call account is a temporary account used when further instalments are paid after shares are issued (900,000 shares x $2)
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6 Forfeiture of shares Directors may be given the power under the company’s constitution to forfeit (cancel) shares in respect of which calls are not made. There are a number of possible actions that can be taken in such i t circumstances: The balance of paid monies may be retained by the company. The amount paid may be refunded back to the forfeiting shareholder. Forfeiture of shares Balance of paid monies may be retained by the company. The balance is retained in an equity account (Forfeited Shares Reserve) Refunds back to forfeiting shareholders The balance awaiting refund is classified as a liability The balance awaiting refund is classified as a liability. Prior to refunding the balance the company could reissue the shares as fully paid shares to new shareholders with the new shareholders paying less than the fully paid value of the share. The difference, as well as any costs of reissue are deducted from the amount to be refunded back to the forfeiting shareholders. Forfeiture of shares On 15 February 2010 the directors of ABC decided to forfeit the 10,000 shares in respect of which the call of $2 was not made. The shares were cancelled and reissued a fully paid to $5 per share on payment of $4 per share share on payment of $4 per share. Costs of $500 were incurred to reissue the shares. Required: Prepare the journal entries to account for the forfeiture and re issue of the 10,000 shares.
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