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Journal Entries: Goofy Ltd.

Goofy Ltd was incorporated on 1 July 2016 and issued a prospectus inviting applications for 500,000 ordinary shares at an issue price of $10. The shares are payable are follows: - 

  • $5 payable on application
  • $3 payable on allotment
  • $2 payable on call to be made 30th September 2016 

The transactions for the period were as follows: 

31 August 2016: Applications were received for 580.000 shares. 

3 September 2016: Applications. 80,000 were rejected by the directors and the application money was returned to the shareholders concerned. 

4 September 2016: The Company allotted 500.000 shares to the remaining applicants. 

25 September 2016: All the allotment money was received. 30 September 2016: The call was made on the shares. payable by 

31 October 2016. 31 october 2016: Call money was received from the shareholders of only 460.000 shares. 31 December 2016: The remaining 40,000 shares were forfeited. The forfeited shares were offered to an investment company at a price of $8.50 per share paid to$10 and the transfer was completed on 31 March 2017. The costs of reissue amounted to $1,800. 

The company's constitution states that any forfeited shares must be refunded to the shareholders. 

30 April 2017: These shareholders received a refund for the amount owed to them. 

Required: Prepare the general journal entries in the books of Goofy Ltd to record the above transactions. Provide narrations for all your entries.


Answer

Q.2.

1)  

Journal Entries in the books of Goofy Ltd.

DateParticularsL.F.Debit ($)Credit ($)
08/31/2016Bank A/c                            Dr. 
     To Share Application A/c

(Being application money received on 580,000 shares at $5 per share)

2,900,000

2,900,000
09/03/2016Share Application A/c         Dr. 
     To Bank A/c

(Being 80,000 share applications rejected and excess application money refunded)

400,000

400,000
09/04/2016Share Application and Allotment A/c         Dr. 
      To Share Capital A/c 

(Being the share allotted and application money transferred to share capital account for on 500,000 shares)

2,500,000

2,500,000
09/25/2016Bank A/c                            Dr. 
     To Share Allotment A/c

(Being application money received on 500,000 shares at $3 per share)

1,500,000

1,500,000
09/25/2016Share Allotment A/c         Dr. 
      To Share Capital A/c 

(Being the share allotted and application money transferred to share capital account for on 500,000 shares)

1,500,000

1,500,000
09/30/2016Share Final Call A/c        Dr. 
       To Share Capital A/c 

(Being final call amount due on 500,000 shares at $2 per share)

1,000,000

1,000,000
10/31/2016Bank A/c                            Dr. 
     To Share Final Call A/c

(Being final call money received on 460,000 shares at $2 per share)

920,000

920,000
12/31/2016Share Capital A/c [40,000*10]                           Dr. 
     To Share Final Call A/c [40,000*2]
     To Forfeited Shares A/c [40,000*8]

(Being 40,000 shares forfeited for nonpayment of final call money of $2)

400,000

80,000
320,000
03/31/2017Bank A/c Dr.
Discount on Shares A/c Dr.
           To Share Capital A/c

(Being 40,000 forfeited shares reissued for $8.50)

340,000
60,000


400,000
03/31/2017Cost of reissue A/c Dr.
           To Bank A/c

(Being cost of reissue incurred on 40,000 forfeited shares)


1,800

1,800
03/31/2017Capital Reserve Dr.
           To Discount on reissue A/c
           To Cost on reissue A/c
(Being loss on reissue transferred to Capital Reserve)


61,800

60,000
1,800
04/30/2017Forfeited Shares A/c Dr.
           To Bank A/c
 (Being the amount forfeited refunded to the shareholders)


320,000

320,000


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