Reference no: EM13498127

Accounting for share capital

The constitution of Henrietta Sweeney Ltd indicated that the company could issue up to 5,000,000 ordinary shares and 1,000,000 preference shares. Prospectuses had been published offering 1,000,000 preference shares at $1.50 payable in full on application by 31 March 2014, and 2,000,000 ordinary shares at $1.20 with 50% due on application by 31 March 2014, 25% due on allotment, and 25% due on a call to be made by the directors at a later date.

By 31 March 2014, the company had received amounts due on 800,000 of the preference shares and on applications for 2,400,000 ordinary shares. On 15 April 2014, the ordinary and preference shares were allotted. The ordinary shares were allotted to applicants on a pro rata basis and the amounts received in excess of that due were to be credited against amounts due on allotment. The amount due on allotment of the ordinary shares was due by 15 May 2014 and this was received on all shares.

The directors made the call on the ordinary shares on 31 August 2014, with amounts due by 30 September. By this date, amounts due on 1,997,000 ordinary shares had been received. On 15 October 2014, the shares on which call money was not received were forfeited and sold as fully paid. An amount of $0.75 was received for each share sold. Costs of the forfeiture and reissue amounted to $800, and were paid. The constitution does not provide for refund of any balance in the forfeited shares account after reissue to former shareholders.

Required:

Prepare the journal entries to record the transactions of Henrietta Sweeney Ltd up to and including that which took place on 15 October 2014. Show all relevant dates, narrations and workings.

(Source: Adapted from Dagwell, R., Wines, G., Lambert, C. (2012). Corporate Accounting in Australia. (1st edition) Sydney: Pearson Australia.)