How should a company account for a share buy back How does it account for a buy

How should a company account for a share buy back how

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14. How should a company account for a share buy-back? How does it account for a buy-back premium? A buy-back discount? Discuss.
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3 Question 2.1 Oversubscription on share issue, payable in full on applicationMaple Ltd was registered on 1 March 2017. Directors decided to issue 500 000 ordinary shares on 31 March 2017, payable in full on application at an issue price of $2.The company received applications for 560 000 shares, sent letters of regret to applicants for 10 000 shares and the remaining applicants received partial allotments by issue of 10 shares for every 11 shares applied for, making the total allotment 500 000 shares. Legal costs of issuing the shares, $12 000, were paid. Required Prepare journal entries and ledger accounts to record the above transactions. MAPLE LTD General Journal 2017 Mar 31 Cash Trust Dr 1 120 000 Application Cr 1 120 000 (Money received on application 560 000 x $2) Application Dr 20 000 Cash Trust Cr 20 000 (Refund to unsuccessful applicants for 10 000 shares) Application Dr 1 000 000 Share Capital Cr 1 000 000 (Issue of 500 000 shares fully paid to applicants for 550 000 shares) Application Dr 100 000 Cash Trust Cr 100 000 (Refunds of excess application money to successful applicants) Cash Dr 1 000 000 Cash Trust Cr 1 000 000 (Transfer on allotment of shares) Share Issue Costs/Share Capital Dr 12 000 Cash Cr 12 000 (Costs of issuing the shares)
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4 MAPLE LTD GENERAL LEDGER Cash Trust 31/03/17 Application 1 120 000 31/03/17 Application 20 000 Application 100 000 Cash 1 000 000 1 120 000 1 120 000 Application 31/03/17 Cash Trust 20 000 31/03/17 Cash Trust 1 120 000 Share Capital 1 000 000 Cash Trust 100 000 1 120 000 1 120 000 Share Capital 31/03/17 Application 1 000 000 Share Issue Costs 31/03/17 Cash 12 000 Cash 31/03/17 Cash Trust 1 000 000 31/03/17 Share Issue Costs 12 000 Balance c/d 988 000 1 000 000 1 000 000 Balance b/d 988 000
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5 Question 2.2 Undersubscription on share issue, money due on allotment On 1 January 2017, Elm Ltd issued a prospectus inviting applications for 300 000 ordinary shares, at an issue price of $6, payable $4 on application, $2 on allotment. By
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