Question 1(25 Marks) The share capital and convertible notes of Orange Ltd on 30

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Question 1(25 Marks) The share capital and convertible notes of Orange Ltd on 30 June 2013 were 120 000 'A' ordinary shares issued at $3, paid % 1.50 50 000 'B ordinary shares issued at S2, fully paid 100 000 990 preference shares issued at$2, paid $1.50 $ 180 000 100 000 150 000 430 000 5% convertible notes* * 10 000 5% $10 convertible notes were issued on 31 July 2012, The notes are convertible into 6 'B' ordinary shares redeemable in cash with a 5% premium on 31 July 2017 Management consider that, in light of current circumstances, it is probable that none of the notes will be converted into shares. Hence, they have been recognised as non-current liabilities. Interest is paid annually on 31 July 100 000

Explanation / Answer

Journal Entries for Orange Ltd Date Particulars Debit Amount Credit Amount Nov. 2013 Bank A/c                                                                   Dr 46,800 To Share Capital A/c 46,800 (Being right issue of 1:5 for a value of $2.6 per share issued on 18000 'B' Ordinary Shares) Jan. 16, 2014 Share First call A/c                                               Dr 1,65,000 To Share Capital A/c 1,65,000 (Being first call money due on 1,10,000 'A' ordinary shares @ Rs.1.5 per shares was made as the directrs resolution) Jan. 31,2014 Bank A/c                                                                   Dr 1,65,000 To Share First call /c 1,65,000 (Being first call money on 1,10,000 'A' ordinary shares @ Rs.1.5 per shares was received) Feb. 5, 2014 Share Capital A/c                                                  Dr 30,000 To Call-in Arrear A/c 15,000 To Forfeited share /c 15,000 (Being 10000 'A' ordinary shares forfeited and cancelled on account of non receipt of the call amount) Mar. 17, 2014 Stock Option Compensation Expense A/c Dr 35,000 To Stock Option A/c 35,000 (Being Prospectus were issued for the 50,000 stock option for 'A' ordinary shares @ 7 cent per share to be excercisable on 31 December 2018) Mar. 31, 2014 Bank A/c                                                                  Dr 24,500 To Stock Option A/c 24,500 (Being stock option received and duly allocated for 35000 'A' ordinary shares) Dec 31, 2015 Bank A/c                                                                  Dr 18,900 To Stock Option A/c 18,900 (Being stock opton received and duly allocated for 27000 'A' ordinary shares) Jan 31, 2016 Profit and loss A/c                                                Dr 2,200 To Stock Option Compensation Expense A/c 2,200 ( Being cost of issuing an stock option was capitalized) June 1,2017 Bank A/c                                                                   Dr 6,00,000 To 8% Debentures A/c 6,00,000 (Being 600 8% debentures were issued at a par value of $100) June 30,2017 Debenture issue expense A/c                        Dr 1,200 To Bank A/c 1,200 (Being cost of issue of debentures capitalized and paid)

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