Required Discuss the benefits to a company from forfeiting and reissuing shares

Required discuss the benefits to a company from

This preview shows page 7 - 8 out of 8 pages.

Required Discuss the benefits to a company from forfeiting and reissuing shares, and prepare journal entries to record the forfeiture and reissue above. The main benefit to a company for forfeiting and reissuing shares is to tidy up the share capital account and the share register. Shares are usually forfeited for non-payment of calls; hence, by forfeiting and reissuing these shares, the company can ensure that all shareholders are paid up to the same amount on their shares. This makes it easier in the future when dividends are declared on a per share basis in that all shareholders are paid up to the same amount and no proportionate dividends need to be calculated.
Image of page 7
PACC6004 Solution Leo et al 10 th edition 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 (Expenses of forfeiture and reissue) Forfeited Shares Liability Dr 1 296 000 Cash Cr 1 296 000 (Refund to former shareholders)
Image of page 8

You've reached the end of your free preview.

Want to read all 8 pages?

  • One '14
  • Share capital, Cash Trust

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes