Reference no: EM132983022

Problem 1: Prepare journal entries to record the following transactions for Tony Ltd 2017

July

1

A prospectus was issued inviting applications for 100 000 ordinary shares at an issue price of $5, with $3 payable on application and the balance payable on 15 August 2018. The issue was underwritten at a commission of $4000. The company also offered those shareholders who purchased more than 1000 shares the right to acquire options for 60c each. The options allowed investors to acquire shares in Tony for $4 each (paid to $5) before 30 November 2017.

21

Applications closed with the ordinary share issue oversubscribed by 20 000. Applications were received for 20,000 options.

31

All shares and options were allotted, and application money refunded to unsuccessful applicants for ordinary shares.

Aug. 14

The underwriter was paid their commission.

Nov 30

By Nov 30 the price of Tony Ltd's shares was $4.20. The holders of 17,000 options exercised the options and the remainder lapsed.

2018

Aug. 1

The first and final call was made on the ordinary shares for $2 per share

15

The balance payable on the call on the ordinary shares was received from holders of 98 000 ordinary shares.

22

The shares on which call money was not received were forfeited.

25

The forfeited shares were placed with an institutional investor, paid to $5 on payment of $4.20. The cash was received from the financial institution, and any balance in the forfeited shares account returned to the former shareholders. Reissue costs amounted to $300.