Question

Question 2

On 1 March 2020, ABC Ltd was registered and a prospectus was issued inviting applications for
1,000,000 ordinary shares at an issue price of $5. The shares were payable $2 on application, $2 on
allotment (due 30 April), and $1 on a final call (expected to be made after 2 years).
By 31 March 2020, applications had been received for 1,400,000 ordinary shares. On 1 April 2020,
1,000,000 ordinary shares were issued. The constitution allows the directors to apply excess
application money to the allotment account. All outstanding allotment money was received by the
due date, and share issue costs of $10,000 were paid on this date.
On 30 June 2020, ABC Ltd offered additional ordinary shares to all ordinary shareholders through
a 1 for 10 rights issue. The terms of the rights issue included an issue price of $4.50 per share. All
ordinary shareholders took up the offer
On 1 October 2020, ABC Ltd issued to existing ordinary shareholders 100,000 options to buy
100,000 ordinary shares. Each option costs 50 cents and entities the holder to buy one ordinary share
at a price of $2.50, exercisable on 31 October 2020. All options were exercised on that date.
On 30 November 2020, ABC Ltd paid interim dividend of 10 cents per share for ordinary shares.
Required
Prepare the journal entries to record the transactions of ABC Ltd for the events outlined above
(Total = 11 marks)

Answer 1

Check the explanation

Step-by-step explanation:

S.no. Date Particulars Debit ($) Credit($)

1. 31.03.2020 Bank A/c Dr 2800000

To Equity Share Application A/c Cr 2800000

(Being Application Money received on Shares)

2. 01.04.2020 Equity Share Application A/c2800000

To Share Capital A/c Cr 2000000

To Share Allotment A/c Cr 800000

(Being allotment made to shareholders)

3. 01.04.2020 Equity Share Allotment A/c 2000000

To Equity Share Capital A/c Cr 2000000

(Being allotment amount transfer to capital account)

4. 01.04.2020 Bank A/c Dr 1200000

To Equity Share Allotment A/c Cr 1200000

(Being Balance allotment amount received)

5. 01.04.2020 Share Issue Expenses A/c Dr 10000

To Bank A/c Cr 10000

(Being Share issue Expenses paid)

6. 30.06.2020 Bank A/c Dr 450000

To Share Capital A/c Cr 450000

(Being Right Share Issued)

7. 01.10.2020 Bank A/c Dr 250000

To Share Capital A/c Cr 250000

(Being Options given to shareholders)

8. 01.10.2020 Share Expenses A/c Dr. 50000

To Bank A/c Cr. 50000

(Being Option cost 50cents per share paid)

9. 30.11.2020 Interim Dividend A/c Dr 120000

To Bank A/c Cr 120000

(Being Interim Dividend Paid)