Theory question 109
Company AccountsOn 1st June, 2021, Iroko Plc issued 300,000 ordinary shares of D 10 at par payable as follows: D 6 on Application; D 3 on Allotment; D 1 on First and Final call.
450,000 applications were received with application monies. The directors decided to: (i) reject 50,000 applications and return the monies received. (ii) issue the shares to the remaining applicants on the basis of three (3) shares for every four (4) shares applied; (iii) credit the excess application monies to allotment.
All the calls were made and monies received accordingly.
You are required to prepare the following Ledger Accounts:
(a) Share Application Account;
(b) Allotment Account;
(c) First and Final Call Account;
(d) Bank Account;
(e) Ordinary Share Capital Account.
Show the model answer
Application money received 450,000 × 6 = 2,700,000; refund 50,000 × 6 = 300,000; 400,000 applicants get 300,000 shares; money needed on application 300,000 × 6 = 1,800,000; excess 600,000 to allotment.
(a) Share Application Account (D): Dr Bank (refund) 300,000; Allotment 600,000; Ordinary share capital 1,800,000 = 2,700,000 | Cr Bank 2,700,000.
(b) Allotment Account: Dr Ordinary share capital (300,000 × 3) 900,000 | Cr Application 600,000; Bank 300,000.
(c) First and Final Call Account: Dr Ordinary share capital 300,000 | Cr Bank 300,000.
(d) Bank Account: Dr Application 2,700,000; Allotment 300,000; First and final call 300,000 = 3,300,000 | Cr Application (refund) 300,000; Balance c/d 3,000,000.
(e) Ordinary Share Capital Account: Cr Application 1,800,000; Allotment 900,000; First and final call 300,000 = 3,000,000 | Dr Balance c/d 3,000,000.
Work out refund and the excess carried to allotment first; share capital ends at 300,000 × D10 = D3,000,000.