Reference no: EM132998245

MBS678 Corporate Accounting - Murdoch University

Assignment

The constitution of Champaigne Ltd, restricts the shares that can be issued to 5,000,000 ordinary A shares and 2,000,000 non-voting B shares. On 1 March 2021, the company decided to offer 3,000,000 of the ordinary A shares to the public, at a price of $2.50 payable in instalments. The shares were to be offered from 20 April, with the closing date for application being 31 May 2021. The terms of the issue were $1 was due on application, $1 was due on allotment and the remaining 50 cents were to be called within four months of allotment.

The directors also decided that 1,000,000 of the ordinary B shares were to be issued as fully paid to the promoters for a payment of $2 per share by 31 March and the remaining B shares were to be part of an employee incentive scheme.

By 31 May, applications for 3,500,000 shares had been received. The directors met and allotted the shares, with $150,000 being returned to unsuccessful applicants, and any other excess application amounts received being transferred to amounts due on allotment. Allotment amounts were due by 15 June and by that date all amounts due were received.

The call on the A shares of 50 cents was made on 31 August and due by 30 September 2021. All call money was received except for that owing on 20,000 shares. On 6 October, the directors met and decided to forfeit these shares. They were then reissued to Bill Wootten as fully paid for a payment of $2.75 per share, with the amounts that had been paid by the previous shareholder being returned less $2,000 for reissue costs.

Required

1. Provide general journal entries to record the share issue transactions (provide brief narrations) and indicate the balance in the cash at bank account assuming that no other transactions had taken place.

Provide written, researched answers to the following two questions. Answers are to be reference where appropriate and are required to be a maximum of 500 words for both questions.

2. What is meant by a forfeited shares reserve? What does it mean if a company has created a forfeited share reserve? (reference your answer where appropriate).

3. Discuss briefly the required disclosures for share capital and reserves (reference your answer where appropriate).

Attachment:- Corporate Accounting.rar