Reference no: EM132613446
On 30 June 2019, the equity of Sunflower Ltd consisted of:
100,000 ordinary shares, issued at $3 $300,000
20,000 8% preference shares, issued at $5 100,000
General reserve 50,000
Retained earnings 60,000
Total equity $510,000
During the year ended 30 June 2020, the following events occurred:
1. On 15 January 2020, a prospectus was issued inviting offers for 50,000 ordinary shares at issued price of $3, payable $2 on application and $1 on allotment.
2. On 25 February 2020, application money was received from the applicants. The directors allotted shares to 50,000 applicants; 35,000 shares to applicants who had paid the full issue price per share, and the remaining to those who have paid only the application money. The company's constitution allows excess application money to be retained and used to offset other money payable. By 31 March 2020, all allotment money had been received, except from Mr Bao who holds 5,000 units of shares.
3. On 30 April 2020 the directors forfeited Mr Bao's shares. The company's constitution provides that no refund is made to the former shareholders.
4. On 1 May 2020, a 1-for-4 renounceable rights offer was made to the fully paid ordinary shares that exist on 30 June 2019. One unit of right can be used to purchase one unit of share at $2.50 payable in full on allotment.
5. By 30 May 2020, half of the total rights were exercised, including 500 rights sold by the shareholders to the third party. Remaining rights were not exercised and lapsed. The underwriting commission of $800 was paid.
6. The forfeited shares were reissued as fully paid for a consideration of $2.80 per share on 30 June 2020. Reissue costs amounted to $200.
7. On 30 June 2020, Sunflower Ltd declared dividends for both types of shares. Ordinary shareholders are entitled to receive dividends of 20 cents per share, prorated for newly issued shares. Shares issued from the rights are not entitled for dividends.
Required
Question 1: Prepare general journal entries to record the above events.
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