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AF210 Unit 3 Tutorial Suggested Solutions

1. The company redeemed 150,000 preference shares for $390,000, paying shareholders from retained earnings. The preference share capital was transferred to retained earnings. 2. 50,000 share options were issued at 75 cents each, raising $37,500. 3. 40,000 options were exercised at $4 per share, raising $144,000. The value of the exercised and lapsed options were transferred to share capital and a lapsed options reserve.

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275 views

AF210 Unit 3 Tutorial Suggested Solutions

1. The company redeemed 150,000 preference shares for $390,000, paying shareholders from retained earnings. The preference share capital was transferred to retained earnings. 2. 50,000 share options were issued at 75 cents each, raising $37,500. 3. 40,000 options were exercised at $4 per share, raising $144,000. The value of the exercised and lapsed options were transferred to share capital and a lapsed options reserve.

Uploaded by

Chand Divnesh
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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AF210 S2 2020

Unit 3 Tutorial Suggested Solutions

Question 2.3 Share issue, payment by instalments


PINE LTD
General Journal
2017
To 1 Sept Cash Trust Dr 1 860 000
Application Cr 1 860 000
(being receipt of applications for 620,000 shares at $2.50 per share)

6 Sept Application Dr 1 800 000


Allotment Dr 600 000
Share Capital Cr 2 400 000
(being issue of 600,000 shares)

Application Dr 60 000
Cash Trust Cr 60 000
(being refund to unsuccessful
applicants)

Share Capital/Share Issue Dr 12 400


Costs
Cash/Payables Cr 12 400
(being payment of share issue
costs)

Cash Dr 1 800 000


Cash Trust Cr 1 800 000
(transfer of application money)
To 1 October Cash Dr 600 000
Allotment Cr 600 000
(being receipt of allotment
money due)

1 Feb 2018 Call Dr 1 800 000


Share Capital Cr 1 800 0000
(being first and final call for $3)
To 1 March Cash Dr 1 800 000
Call Cr 1 800 000
(being receipt of call money)

Question 2.6 Rights issues and private placements

ASH LTD
General Ledger

A.
(1) 2017
Aug 31 Cash Dr 300 000
Share Capital Cr 300 000
(Rights issue for 75 000
shares issued for $4)

Sept 7 Share Issue Costs/Share Capital Dr 8 000


Cash Cr 8 000
(Payment of underwriting
commission)

(2) 2018
March 1 Cash Dr 880 000
Share Capital Cr 880 000
(Private placement of 220 000
shares at $4 each with Blossom
Investments Ltd)

B.
ASH LTD
EQUITY
(as at 30 June 2018)

Contributed equity:
595 000 ordinary shares issued for $4 $2 380 000
less Share issue costs (underwriting) 8 000 $2 372 000
Revaluation Reserve/Surplus 700 000
Retained Earnings 450 000
$3 522 000
Question 2.12 Oversubscription with pro rata allotment, and forfeiture

GUM LTD
General Journal
2017
August 15 Cash Trust Dr 4 200 000
Application Cr 4 200 000
(Cash received on application)

August 16 Application Dr 3 000 000


Allotment Dr 2 000 000
Share Capital Cr 5 000 000
(Allotment of 1 000 000 shares)

Cash Dr 4 200 000


Cash Trust Cr 4 200 000
(Transfer of trust funds)

Application * Dr 1 200 000


Allotment Cr 1 000 000
Calls in Advance Cr 200 000
(Allocation of application
across allotment and calls in advance)

August 28 Share Issue Costs/Share Capital Dr 14 000


Cash Cr 14 000
(Payment of underwriting
commission and other share
issue costs [$8 000 + $6 000])

September 15 Cash Dr 1 000 000


Allotment Cr 1 000 000
(Cash received on allotment)
2017
November 1 Call Dr 1 000 000
Share Capital Cr 1 000 000
(Call of $1 per share)

Calls in Advance Dr 200 000


Call Cr 200 000
(Transfer of calls received
in advance)

November 30 Cash Dr 770 000


Call Cr 770 000
(Cash received on 770 000 shares)

December 7 Share Capital Dr 180 000


Call Cr 30 000
Forfeited Shares Liability Cr 150 000
(Forfeiture of 30 000 shares)

December 15 Cash Dr 168 000


Forfeited Shares Liability Dr 12 000
Share Capital Cr 180 000
(Reissue of shares forfeited)

December 16 Forfeited Shares Liability Dr 138 000


Cash Cr 138 000
(Refund to former shareholders)

* Workings
Allocation of money received on application

No. of No. of Money Application Allotment Call


Shares Shares Received
applied for Allotted
200 000 200 000 1 200 000 600 000 400 000 200 000
1 000 000 800 000 3 000 000 2 400 000 600 000 -
1 200 000 1 000 000 $4 200 000 $3 000 000 $1 000 000 $200 000
Question 2.17 Series of independent situations

1. Share Capital - Preference Dr 375 000


Retained Earnings Dr 15 000
Shareholders’ Redemption Cr 390 000
(Redemption of 150 000
shares at price of $2.60)

Shareholders’ Redemption Dr 390 000


Cash Cr 390 000
(Payment on redemption)

Retained Earnings Dr 375 000


Share Capital - Ordinary Cr 375 000
(Transfer against retained earnings)

4. Cash Dr 37 500
Share Options Cr 37 500
(Issue of 50 000 share options
at 75c each)

5. Cash Dr 144 000


Share Capital – Ordinary Cr 144 000
(Issue of 40 000 ordinary shares
as a result of 40 000 options exercised)

Share Options Dr 37 500


Share Capital – Ordinary Cr 30 000
Lapsed Options Reserve Cr 7 500
(Write-off of options exercised, and lapsed)

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