Provide the general journal entries necessary to account

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Sun Ltd issues a prospectus inviting the public to subscribe for 9 million ordinary shares at a price of $7 each. The terms of the issue are that $3.00 is to be paid on application and the remaining $4.00 within one month of allotment.

  • Applications are received for 11 million shares during July 2021. The directors allot 9 million shares on 5 August 2021. All applicants receive shares on a pro rata basis. The amounts payable on allotment are due by 5 September 2021.
  • By 5 September 2021 the holders of 150,000 shares have failed to pay the amounts due on allotment. The directors forfeit the shares on 10 September 2021. The shares are resold on 15 September 2020 as fully paid up for a price of $5.80 and incurred costs of $5,000.

Required:

Problem 1: Provide the general journal entries necessary to account for the above transactions and events.

Problem 2: Explain the difference between forfeited shares reserve account and forfeited shares account.

Reference no: EM132990744

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