Reference no: EM133008574
Question - Emerald Ltd has capital that comprises of 400,000 shares issued at $3.00 and paid to $1.50 as at 30 June 2023. On 1 September, 2023 a call of $1.20 per share is made.
The amount of the call is due and payable by 14 November 2023.
A total of 250,000 shares of the total capital of 400,000 shares are paid up on the required call.
On the 30 November 2023, the directors decide to forfeit those shares that are not paid on the call and reissue them at $2.50 per share.
The reissue occurs on the 15 December 2023. Various costs are associated with the reissue of the shares. These costs include:
Legal fees $5,000
eBrokerage fees $2,500
Feasibility studies $1,500
Marketing and promotion $3,000
Overtime paid to employees $1,000
According to Emerald Ltd's constitution there is a requirement that any surplus made on a resale of forfeited shares proceeds are to be returned to the former shareholder.
Required -
(a) Provide journal entries to record the transactions for this event (you will need to to include narrations for your journals).
(b) Is there any requirement for the equity account of a reporting entity to meet any specific recognition criteria? Explain.
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