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Prepare the journal entries for the rights issue

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Question - Sunny Day Ltd needs to raise funds for mining projects in Western Australia. It currently has share capital of $2.14 million dollars and has issued 1.07 million shares. The directors have decided to make a non-renounceable rights issue to existing shareholders of 214,000 new shares at an issue price of $10 per share.

Rainy Day Ltd, a firm of finance brokers has agreed to fully underwrite the rights issue. Sunny Day Ltd issued a prospectus on 1 April 2019 and applications closed on 3 May 2019. Costs associated with the rights issue and the eventual issue of the shares were $20,810.

Prepare the journal entries for the rights issue and the subsequent share issue made by Sunny Day Ltd, assuming that 85% of the rights were exercised by the due date.

Reference no: EM132668604

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