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ACCOUNTING METHOD II XXXXXXXXXXEQUITY
ASSIGNMENT PART A
Part A of the assignment comprises two questions. The questions relate to:
New share issue
Forfeiture and reissue of shares
Each question is independent of the other question. In answering these questions
careful consideration of the issues is required to fully address the issues presented.
Not all of these areas have been covered in the Equity topic in Accounting Method II.
In practice accountants are presented with issues which they are unfamiliar with and
need to learn to resolve them. In part, that is what you are presented with here. To
assist you, though, some materials have been made available on MyUni. The due
time/date for submission is 11:00pm on Sunday the 13th May 2018.
Students will submit their solutions via MyUni. Details for this will be made available
in the weeks to come. The assignment has been released now so that students can
consider what is required and their answers.
This Assignment must be your own work. Students are reminded of the various
University plagiarism policies and any occu
ences of plagiarism will be dealt with
accordingly. Group assignments are not permitted.
This Assignment will be marked out of 50 marks (prior to the deduction of any
presentation marks) and this represents 5% of the overall assessment in the course
Accounting Method II.
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QUESTION XXXXXXXXXXMARKS
Mercer Industries Ltd undertook a public share issue. The general journal entries for the
share issue are presented below. The following additional information is also provided:
The applicants for the share issue were a mixture of some who paid for their
shares in full and others who paid only the required application amount.
The applicants who paid only the required application amount were of two
groups. One group had their applications refused and their money refunded.
The other group applied for more shares than available and they were issued
shares in proportion to their applications.
The 2nd and Final Call was for $1.25 per share. The Calls in Advance account used
to partly satisfy this Call related only to original applicants who paid for their
shares in full.
REQUIRED
Using the general journal entries and the additional information provided and complete
the questions which follow.
20X2 DR CR
Jan 1 Bank Trust 44,000,000
Application 44,000,000
5 Application 20,000,000
Allotment 15,000,000
Share Capital 35,000,000
Application 24,000,000
Allotment 15,000,000
Bank Trust 2,000,000
Calls in Advance 7,000,000
Cash at Bank 42,000,000
Bank Trust 42,000,000
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Aug 1 1st Call 8,750,000
Share Capital 8,750,000
Calls in Advance 5,750,000
1st Call 5,750,000
Sept 30 Cash at Bank 3,000,000
1st Call 3,000,000
Dec 1 2nd and Final Call 6,250,000
Share Capital 6,250,000
Calls in Advance 1,250,000
2nd and Final Call 1,250,000
20X3
Jan 31 Cash at Bank 4,985,000
2nd and Final Call 4,985,000
QUESTIONS
1. How many shares have been issued when the 2nd Call was made?
2. How much of the 2nd Call is unpaid?
3. In the December 1 journal entry dealing with Calls in Advance, how many
shares are represented in that amount?
4. How many shares of the 2nd Call remain unpaid?
5. How many shares had been issued when the 1st Call was made?
6. What was the amount per share of the 1st Call?
7. How many shares were issued?
8. What was the Application amount per share?
9. What was the Allotment amount per share?
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10. How many shares were paid in full on Application?
11. How many share applications were refused and received a refund?
12. How many shares were applied for in total?
13. What is the paid up value per share?
14. How many shares were applied for and paid just to the Application amount
excluding those who were refused?
15. How much of the Application money received was able to be kept?
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QUESTION XXXXXXXXXXMARKS
Pe
y Electronics Ltd manufactures highly sophisticated electronics circuits to the defence industry.
It was incorporated over 10 years ago. At the Board meeting held on 15th July 20X5 it was decided
to raise more capital via a public offering of shares. As a result a prospectus was issued seeking
5,000 shares. The offer was oversubscribed with applications for 8,750 shares received. All
applications paid only the application amount and the required 5,000 shares were issued. Shares
were issued in proportion to their applications. A First Call was made on the shares on 1st Fe
uary
20X6. The general ledger T accounts below provide the details of the issue and the call.
(NB The number of shares has been kept small so that they are easily managed by students.
Clearly though this is a public company and any share issue to the public would deal in
numbers much larger.)
Share Capital
1/7/X5 Bal
d 750,000
1/10/X5 Applications 12,500
XXXXXXXXXXAllotment 5,000
1/2/X6 First Call 9,000
Calls in Advance
1/2/X6 First Call 4,375 1/10/X5 Applications 4,375
First Call
1/2/X6 Share Capital 9,000 1/2/X6 Calls in Advance 4,375
31/3/X6 Cash at Bank 4,440
On 1st May 20X6 the decision was made to forfeit the shares of the shareholders who did not pay
the First Call. Those shares were then offered to another single shareholder at price of
$5.15/share but paid to the amount of the other shares. This single shareholder accepted the offer
and paid the amount on 15th June 20X6 and the costs associated with the forfeiture and re-issue
were $450. The forfeited shareholders received refunds of the remaining amounts on 30th June
20X6.
You are provided with general journal entries below that relate the share forfeiture, subsequent
share reissue and payment to forfeited shareholders. However, the dates, dollar amounts and
na
ations have been deleted.
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REQUIRED
Reconstruct the general journal template provided and insert the dates, dollar amounts and
na
ations into the general journal entries provided in the template.
PLEASE NOTE – This is a difficult question and requires care in determining the co
ect amounts
and factors. A hint is to reconstruct all the transactions in relation to the share issue.
The general journal entries template is:
Date Particulars DR CR
Share Capital
1st Call
Forfeited Share Reserve
Date Particulars DR CR
Cash at Bank
Forfeited Share Reserve
Share Capital
Date Particulars DR CR
Forfeited Share Reserve
Cash at Bank
Date Particulars DR CR
Forfeited Share Reserve
Cash at Bank
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ACCOUNTING METHOD II XXXXXXXXXXEQUITY
ASSIGNMENT PART A
SUGGESTED TEMPLATE SOLUTION
QUESTION 1
Question Answer
1
How many shares have been issued when the 2nd
Call was made?
5,000,000
2
How much of the 2nd Call is unpaid?
$15,000
3
In the December 1 journal entry dealing with Calls in
Advance, how many shares are represented in that
amount?
1,000,000
4
How many shares of the 2nd Call remain unpaid?
12,000
5
How many shares had been issued when the 1st Call
was made?
5,000,000
6
What was the amount per share of the 1st Call?
$1.75
7
How many shares were issued?
5,000,000
8
What was the Application amount per share?
$4.00
9
What was the Allotment amount per share?
$3.00
10
How many shares were paid in full on Application?
1,000,000
11
How many share applications were refused and
eceived a refund?
500,000
12
How many shares were applied for in total?
9,500,000
13
What is the paid up value per share?
$10.00
14
How many shares were applied for and paid just to
the Application amount excluding those who were
efused?
8,000,000
15
How much of the Application money received was
able to be kept?
$42,000,000
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QUESTION 2
Date Particulars DR CR
1/5/X6 Share Capital 1,060
1st Call 185
Forfeited Share Reserve 875
(Forfeiting 200 shares issued to
$5.30/share but unpaid at
$0.925/share)
Date Particulars DR CR
15/6/X6 Cash at Bank 1,030
Forfeited Share Reserve 30
Share Capital 1,060
(Reissue of 200 forfeited shares paid to
$5.30 for $5.15 cash.)
Date Particulars DR CR
15/6/X6 Forfeited Share Reserve 450
Cash at Bank 450
(Reissue costs paid)
Date Particulars DR CR
30/6/X6 Forfeited Share Reserve 395
Cash at Bank 395
(Balance of forfeited shares reserve
paid to previous shareholders.)
ACCOUNTING METHOD II XXXXXXXXXXEQUITY
ASSIGNMENT PART A
TEMPLATE
Part A of the assignment comprises two questions. The questions relate to:
· New share issue
· Forfeiture and reissue of shares
This file provides a template for your answers. This template MUST be used. Failure to use the template will result in zero marks. This template has been provided in Word format so that you can download it and insert your typed answers into it. Once you have completed the information required in the template you then convert it to pdf format and submit it into MyUni under Assignments where you