1 Jan DR Cash Trust 250000 CR Application 250000 31 Jan DR Application 250000

1 jan dr cash trust 250000 cr application 250000 31

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1 Jan DR Cash Trust 250,000 CR Application 250,000 31 Jan DR Application 250,000 CR SC 250,000 DR Cash 250,000 CR Cash Trust 250,000 DR Allotment 125,000 CR SC 125,000 DR Cash 125,000 CR Allotment 125,000 31 May DR Call 125,000 SC SC 125,000 30 June DR Cash 112,500 CR Call 112,500 Unpaid calls are calls in arrears and are reductions of SC in company’s FSs. Balance in SC at 30 June is: Share capital (100,000 ordinary shares @ $5) 500,000 Less: Calls in arrears (10,000 shares @ $1.25) (12,500) TOTAL SHARE CAPITAL 487,500 Oversubscription
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Director may reduce no. of shares issued to each applicant on pro-rata basis or issue shares only to certain applications. Treatment of excess application depends on terms of company’s constitution. Opti ons include: refunding excess application monies or retaining it as an advance on future calls (calls in advance acc. is treated as contributed equity). Eg4. ABC issued prospectus for 100,000 x $5 shares on 1/1/2012 requiring payment of $3 on application and $2 in 1years time. Company received 125,000 applications throughout Jan. On 31/1/2012 ABC issued 100,000 shares. Assume excess money was offset against call due in 1years time. 1-30 Jan DR Cash Trust 375,000 CR Application 375,000 31 Jan DR Application 370,000 CR SC 300,000 CR Calls in advance 75,000 DR Cash 375,000 CR Cash Trust 375,000 Forfeiture of shares Directors may forfeit shares when calls are not made. Possible actions include: 1. Balance of monies may be retained by company balance is retained in equity acc., Forfeited Shares Reserve 2. Amount paid refunded to forfeiting shareholder balance is recorded in liability acc., Forfeited Shares Acc Prior to refunding balance, company could reissue shares as fully paid shares to new shareholders who pay less than fully paid value of share. The difference, as well as costs of reissue are deducted from amount refunded back to forfeiting shareholders. This option is only available if stated i n company’s constitution. When constitution is silent, company is entitled to keep any excess (option 1 above) Eg5. [continued from eg3.] On 1/7/2012 directors decided to forfeit 10,000 shares in which call of $1.25 was not made. Shares were cancelled and reissued as fully paid to $5 per share on payment of $4 per share. Costs of $500 were incurred to reissue. 1 July DR SC 50,000 CR Call 12,500 CR Forfeited Shares 37,500 DR Cash 40,000 DR Forfeited Shares 10,000 CR SC 50,000 DR Forfeited Shares 500 CR Cash 500 DR Cash 2,000 CR Forfeited Shares Account 2,000 Share Issue & Formation Costs Underwriting costs: arranging for issue to be underwritten will avoid having refund monies due to under- subscription. Underwriter agrees to purchase all excess shares in return for upfront payment of an underwriting commission, treated as a reduction against contributed equity. Other share costs: stamp duty, legal fees etc., treated as a reduction against contributed equity.
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