On 1 April 2011, Paprika Ltd was incorporated and a prospectus was issued inviti

Question

On 1 April 2011, Paprika Ltd was incorporated and a prospectus was issued inviting applications for 100,000 shares, at an issue price of $10, payable $5 on application, $2.50 on allotment and $1.25 on each of two calls to be made at a later date.

By 30 April, applications were received for 120,000 shares. On 3 May, the directors allotted 100,000 shares to the applicants in proportion to the number of shares for which applications had been made. The surplus application money was offset against the amount payable on allotment. The balance of the allotment money was received by 10 May. Legal costs of forming the company were $1,300 and were paid on 11 May. Share issue costs of $800 were also paid on the same date.

The two calls were then made on 1 September 2011 and 1 January 2012 respectively, but the holders of 10,000 shares did not pay either call. In addition, a holder of another 5,000 shares did not pay the second call. All call monies are due at the end of the month it is called.

On 10 March 2012, as provided by the company's constitution, the directors forfeited the 15,000 shares on which calls were unpaid.

On 25 March 2012, the forfeited shares were reissued as fully paid for a consideration of $9 per share. Costs of forfeiture and reissue amounted to $250. The constitution does not provide for refund of any balance in the forfeited shares account after reissue to former shareholders.

Required:

(a) Prepare ledger accounts to record the above transactions.
(b) Prepare the equity section of Paprika’s statement of financial position as at 25 March 2012, immediately after the completion of the above transactions.

Explanation / Answer

30-Apr

3-May

10-May

11-May

1-Sep

10-Mar

25-Mar

25-Mar

Bank a/c

Share capital a/c

Forfeiture a/c

$1,000,000

Date Particulars Debit $ Credit $

30-Apr

Bank 600000      Share application 600000 (Being application amount received) Share application 600000      Share capital 500000      Share allotment 100000 (Being application amount transfor to share capital a/c)

3-May

Share allotment 250000        Share capital 250000 (Share allotment due entry)

10-May

Bank 150000      Share allotment 150000 (Being remaining balance amount received)

11-May

Legal expenses 1300 Issue expenses 800      Bank 2100 (Being legal expense paid)

1-Sep

Share first call 125000 Share final call 125000      Share capital 250000 (Being first cal amount due) Bank 218750       Share first call 112500       Share final call 106250 (Being calls amount received)

10-Mar

Share capital 150000       Share firs call 12500       Share second call 18750       Share forfeiture 118750 (Being 15000 shares were forfeited)

25-Mar

Bank 135000 Forfeiture 15000        Share capital 150000 (Being forfeited shares reissued) Forfeiture 103750        Capital reserve 103750

25-Mar

Reissue expenses 250       Bank 250

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