On 1 January 2017, Elm Ltd issued a prospectus inviting applications for 300 000
ID: 2463533 • Letter: O
Question
On 1 January 2017, Elm Ltd issued a prospectus inviting applications for 300 000 ordinary shares, at an issue price of $6, payable $4 on application, $2 on allotment. By 30 April, applications were received for 290 000 shares with $4 paid. As the minimum required subscription had been reached, on 1 May the directors allotted 290 000 shares. Share issue costs of $1200 were also paid on the same date. All of the allotment money was received by 1 June.
Required
Prepare journal entries to record the above transactions.
Explanation / Answer
2017
To 30 April
Cash Trust
Dr
1 160 000
Application
Cr
1 160 000
(being receipt of applications)
1 May
Application
Dr
1 160 000
Allotment
Dr
580 000
Share Capital
Cr
1 740 000
(being issue of shares)
Share Capital/Share Issue Costs
Dr
1 200
Cash/Payables
Cr
1 200
(being payment of share issue costs)
Cash
Dr
1 160 000
Cash Trust
Cr
1 160 000
(transfer of application money)
To 1 June
Cash
Dr
580 000
Allotment
Cr
580 000
(being receipt of allotment money due)
2017
To 30 April
Cash Trust
Dr
1 160 000
Application
Cr
1 160 000
(being receipt of applications)
1 May
Application
Dr
1 160 000
Allotment
Dr
580 000
Share Capital
Cr
1 740 000
(being issue of shares)
Share Capital/Share Issue Costs
Dr
1 200
Cash/Payables
Cr
1 200
(being payment of share issue costs)
Cash
Dr
1 160 000
Cash Trust
Cr
1 160 000
(transfer of application money)
To 1 June
Cash
Dr
580 000
Allotment
Cr
580 000
(being receipt of allotment money due)
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