Company formation – Issue by instalments, oversubscription, forfeiture and reissue
On 1 January 2012, Flowers Ltd offered 1,000,000 ordinary shares to the public at an issue price of $10.00 per share, with $8.00 payable on application, and $2.00 due on a call to be made by the directors at a later date. The closing date for applications was 31 January 2012.
By 31 January 2012, applications had been received for 1,500,000 shares. The directors met on 5 February and decided to allot shares on a first-come first-served basis, and application money was refunded to unsuccessful applicants.
The directors made the call on the ordinary shares on 1 June 2012, with amounts due by 30 June 2012. By this date, amounts due on 980,000 ordinary shares had been received.
On 10 July 2012 the 20,000 shares were forfeited, and on 20 July 2012 they were auctioned as fully paid. An amount of $9.00 was received for each share sold. Share reissue costs amounted to $8,000. The constitution provided for any surplus on resale, after satisfaction of unpaid calls and costs, to be returned to shareholders whose shares were forfeited.
Required:
Provide the journal entries to account for the above entries. Show all relevant dates, narrations and workings.
