Reference no: EM133207182
Morning Star Ltd was registered on 1 July 2021, as a company with a constitution limiting the shares that could be offered to 5 000 000 Ordinary shares (including all classes) and 2 000 000 preference shares. The company issued a prospectus dated 1 July 2021 inviting the public to apply for 1 000 000 Ordinary A class shares at $10.00 per share. The terms of the shares on issue are $5.00 on application, $3.00 on allotment and a future call of $2.00 with date to be determined.
If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess application money will be applied to allotment and calls before any refunds will be given.
On 30 July, applications for the Ordinary A class shares closed. Applications for 1 200 000 shares in total had been received with applicants for 300 000 shares paying the full price and 900 000 shares paying only the application fee.
On 1 August, the Ordinary A class shares were allotted on a pro-rate basis with all allotment money owed paid by the 30 August.
The company paid share issue costs of $10,000 for the issuing of Ordinary A class shares on 1 September. The share issue costs related to legal expenses associated with the share issue and fees associated with the drafting and advertising of the prospectus and share issue.
The call on the Ordinary A class shares was made on 15 September and due by 30 September.
All call money was received except for the call on 50 000 shares. The directors met and forfeited the shares on 15 October. On 30 October, the forfeited shares were reissued at $9 fully paid to $10.00. Costs associated with reissuing the forfeited shares totalled $4,500. The remaining money was refunded to the defaulting shareholders on 15 November.
On 1 January 2022, Morning Star Ltd issued via a private placement semi-annual coupon debenture (which pays interest every 6 months) with a nominal value of $550,000. The debenture term is five years and the coupon rate is 6% per annum. The market requires a rate of return of 4% per annum. The money came in and the debentures were allotted on the same date. The first interest payment will occur on 30 June 2022.
On the same day (1 January), Monring Star issued 80 000 options for the Ordinary A class shares with an exercise price of $8.00 each. It costs $2.00 per option. These options expire on 30 June 2022.
On 31 March 2022, the directors announced a renounceable 1-for-40 rights issue of the Ordinary A class shares. Morning Star asked for $7 to be paid if a shareholder is exercising that right. The share price is $10 per share at the time of exercising the rights. The holders of 600,000 shares exercise their rights.
By 30 June 2022, 75 000 options were exercised. The remaining options are lapsed.On the same day (30 June), 15 000 Ordinary A class shares were bought back by Morning Star for $11.00 each. The original issue price for these shares were at $10.00 per share.
Required:
(a) Prepare journal entries for the above transactions for the year ended 30 June 2022. Note: The entries should be in strict date order of the underlying event and please round all amounts up to the whole number.
(b) Prepare an extract of the statement of change in equity to show the composition and movement of the ordinary shares account of Morning Star Ltd as at 30 June 2022. Please provide the opening balance, movements in share capital and closing balance of each class of shares.