Question

Maxi Berhad offered 1 million ordinary shares for issue to public on 1 January 2019 at an issue price of $1.50 per share. A total amount of $3,000,000 was received from the applicants on 30 November 2019. The oversubcription of $1,500,000 was returned to unssucessful applicants on 20 December 2019. On 31 March 2020, Maxi Berhad declared a 3 for 2 bonus issue.

Extract of Maxi Berhad's balance sheet prior to issuane of bonus shares is as follows:

	$
Ordinary Share Capital	1,500,000
Revaluation Reserve	1,500,000
Retained Profits	5,000,000
	8,000,000

Required:-

State the journal entries required to account for the above transactions and prepare extract of the balance sheet after bonus issue. (10 marks)

Answer 1

Answer
Journal Entry
Date	Account tile and explanation	Debit	Credit
November 30,2018	Cash [ 2,000,000 X 1.5]	$30,00,000
	Common stock [2,000,000X1]		$20,00,000
	Additional paid in capital [2,000,000X 0.5]		$10,00,000
	[To record for common stock issuance at a premium ]
December 20,2018	Common stock [ 1,000,000X 1]	$10,00,000
	Additional paid in capital [ 1,000,000 X 0.5]	$ 5,00,000
	Cash [ 1,000,000 X 1.5]		$15,00,000
	[To record Excess application money refunded ]
January 31,2020	Retained Profit [ 1,500,000 X 3/2]	$22,50,000
	Common stock		$22,50,000
	[ To record Bonus shares issued out of retained earnings ]