Share capital -A Dr 39000(30000* $1.3) Call-A (arrears) Cr 9000 Forfeited shares liability Cr 30000
(Being forfeiture of the 30000 shares each called to $1.3 and paid $1)
According to the company’s constitution which is not silent, the share forfeited means the part of calls which is unpaid by ordinary shares. The forfeited shares have two different purports. When forfeited share are decided cancelled and never reissued, then the funds form paid in forfeited shares will credit in a reserve account as equity. Otherwise, when company want reissue forfeited shares, the funds which is deduct any cost and interest payable before forfeiture as a liability. In this case, the company want reissue the shares, so it should be considered liability.
Share capital –A: 30000* $1.3=39000 Forfeited shares liability: 39000-9000=30000
Cash Dr 33000($1.1*30000)
Forfeited share liability Dr 6000 Share capital - A Cr 39000($1.3*30000)
(Reissued of 90000forfeited shares)
As the constitution, the company could reissue those shares. The company sell those 30000 shares again. This process is the same with sell shares. However, in this case, there are $6000 difference between cash account with share capital account, because of difference price of received from shareholders and carry to share capital. That $6000 should be entry forfeited share liability, as offset the liability. The company offer $39000 capital, but just received $33000 cash.
Accounting to the question, the company as paid to $1.3 per share for $1.1cash per share. Then, debit cash and forfeited share liability. Credit the share capital. Cash: 30000*$1.1=$33000
Forfeited share liability: 30000*($1.3-$1.1)=$6000
Share capital – A: 30000*1.3=$39000
Forfeited share Liability Dr 1,500 Cash at bank Cr 1,500
(Payment of 30,000 shares issue cost)
When company decided reissue the shares, there would occur some expenses. Those cost as share issue cost and transferred to entry forfeited share liability account. Some cash used to pay the liability.
Forfeited share liability Dr 22500 Cash Cr 22500
(Refund of surplus after forfeiture to shareholders)
When finished reissue the shares, the surplus of liability should be refund the shareholders, then the forfeited share liability account was closed.
At first ,the total Forfeited share liability was $30000, when company reissued the shares, $6000 liability was offset form share capital, and $1500 offset form share issues cost. It is remain $22500 in forfeited share liability.
Forfeited share liability : $30000-$6000-$1500=$22500
Cash trust -c Dr 150000 Application -c Cr 150000
(To record the receipt of $1 application money per share on 150000shares)
Cash trust is a separate bank account for the company, the fund for this account can be transferred for cash account after the company has allotted shares to applications or returned the money for applicants when the company fails allotted shares (s. 722).
Application -C Dr 150000 Share capital -C Cr 150000
(to record funds contributed by shareholders for the 150000 $1 shares paid in full)
The company decide to