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DELINQUENT SUBSCRIPTIONS Lecture Notes PDF

The document describes the process for dealing with a delinquent stock subscription. If a subscriber fails to pay, the corporation will send notices and eventually declare the subscription delinquent. The delinquent subscription is then offered for sale at auction. The highest bidder who pays all amounts owed will receive shares, with any excess going to the original subscriber. If there are no bidders, the shares become treasury shares owned by the corporation.

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503 views3 pages

DELINQUENT SUBSCRIPTIONS Lecture Notes PDF

The document describes the process for dealing with a delinquent stock subscription. If a subscriber fails to pay, the corporation will send notices and eventually declare the subscription delinquent. The delinquent subscription is then offered for sale at auction. The highest bidder who pays all amounts owed will receive shares, with any excess going to the original subscriber. If there are no bidders, the shares become treasury shares owned by the corporation.

Uploaded by

haua
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DELINQUENT SUBSCRIPTIONS

•
• A subscriber fails to pay his subscription on the call date.

• The corporation sends several notices to remind him of his obligation.

• If these notices are ignored by the subscriber, his subscription is declared


delinquent.
• The delinquent subscription is offered for sale in a public auction.

• The offer price of the delinquent shares includes the following:


Balance due on the subscription
Interest accrued on the subscription due
Expenses of advertising and other costs of sale

• The sale of the delinquent subscription is issued to the highest bidder.

• The highest bidder is the one who is willing to pay the unpaid balance of the
subscription plus accrued interest plus all expenses related to the sale and is
willing to receive the smallest number of shares.

• Once the subscription is fully paid, all subscribed shares are issued. Shares
are first given to the highest bidder. The excess shares are given to the
defaulting subscriber.

• If there is no bidder, all of the delinquent shares will be issued in the name of
the corporation. Such shares are considered treasury shares. The defaulting
subscriber does not get any share.

PROFORMA JOURNAL ENTRIES:

1. Subscription of 1,000 ordinary shares at P10 par value.

Subscription Receivable –Ordinary 10,000


Subscribed Ordinary Share Capital 10,000

2. 20% collection

Cash 2,000
Subscription receivable-Ordinary 2,000
3. The subscriber defaulted. The subscription was declared delinquent.

NO JOURNAL ENTRY

4. Advertised the delinquent share for public auction - P1,000

Receivable from Highest Bidder 1,000


CASH 1,000

5. The highest bidder bided for 750 shares and paid the amount due.

CASH 9,000
Subscription receivable –Ordinary (10,000-2,000) 8,000
Receivable from Highest Bidder 1,000

• The highest bidder is the one who is willing to pay the unpaid balance
(P8,000) of the subscription plus accrued interest plus all expenses (P1,000)
related to the sale and is willing to receive the smallest number of shares.

6. Issued stock certificates to Highest Bidder and Defaulting subscriber

Subscribed Ordinary share capital 10,000


Ordinary Share Capital 10,000

• Once the subscription is fully paid, all subscribed shares are issued. Shares
are first given to the highest bidder (750 SHARES). The excess shares are
given to the defaulting subscriber (250 SHARES).

• If there is no bidder, all of the delinquent shares will be issued in the name of
the corporation (1,000 SHARES). Such shares are considered treasury
shares. The defaulting subscriber does not get any share.
•
ONLY # 5 JOURNAL ENTRY WILL CHANGE # 6 IS THE SAME.
TREASURY SHARE -Ordinary 9,000
Subscription receivable –Ordinary (10,000-2,000) 8,000
Receivable from Highest Bidder 1,000

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