Question

weele to Question 1 Polard Ltd issues a prospectus inviting the public to subscribe for 60 million ordinary shares of $3.00 each. The terms of the issue are that $2.00 is to be paid on application and the remaining $1.00 within one month of allotment Applications are received for 72 million shares during August 2018. The directors allot 60 million shares on 15 September 2018. All applicants receive shares on a pro rata basis. The amounts payable on allotment are due by 15 October 2018 By 15 October 2018 the holders of 12 million shares have failed to pay the amounts due on allotment. The directors forfeit the shares on 30 October 2018. The shares are resold on 15 November 2018 as fully paid. An amount of $3.00 per share is received. The balance of forfeited shares were refunded on 30 November 2018. TA Required Provide the journal entries necessary to account for the above transactions and events.

Answer 1

		( $ in million)	( $ in million)
Date	Account Titles	Debit	Credit
Aug 2018	Cash	144
	Share application		144
Aug 2018	Share application	144
	Common stock		120
	Share allotment		24
15 Sep 2018	Share allotment	36
	Common stock		36
	[ 60million *1 - 24]
15 Oct 2018	Bank	28.8
	Arrears on allotment	7.2
	Share allotment		36
30 Oct 2018	Common stock	36
	Arrears on allotment		7.2
	Share forfeiture		28.8
15 Nov 2018	Cash	36
	Common stock		36
	Share forfeiture	28.8
	Cash		28.8

Workings:

Calculation of arrears on allotment

12 million shareholders failed to pay,

They may have applied for 14.4 million shares ( (12 * 72 / 60)

Money received on 14.4 million = 14.4 * 2 = 28.8 million

Actual money for 12 million = 12*2 = 24 million

Excess money adjusted for allotment = 4.8 million

Arrears = 12 - 4.8 = 7.2 million