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Prepare journal entries to record the forfeiture and reissue

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Reference no: EM132671339

Corona Ltd announced all shares on which the call of $1/share due for payment on 1 September 2020, remains unpaid, will be sold by public auction on 1 November 2020.

  1. 500 000 shares were forfeited
  2. the forfeited shares were all paid to $1.50 per share 
  3. all the shares were sold at the auction for $2.20 per share and will be credited to $2.50 
  4. costs of forfeiture and reissue amounted to $5000 
  5. the balance of the Forfeited Shares account will be refunded to the former shareholders.Required

Problem 1: Prepare journal entries to record the forfeiture and reissue above.

Problem 2: Discuss the benefits to a company from forfeiting and reissuing shares.

Reference no: EM132671339

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