ACCT6003 Capital and Balance Amount Alloted on Pro Rata Basis
$3 on application (due by 1 August 2017)
$2.5 on allotment (due by 30 August 2017)
$1.5 on Call 1 (due by 15 June 2018)
$1 on Call 2 (due by 30 July 2018)
Application has been closed and by 1 August 2017, 600,000 shares have been applied for of which applicants for 100,000 shares forwarded the full $8 per share, and the reminder paid application money only.On 15 August, directors decided to allot shares in full to applicants who had paid the full amount and to all remaining applications on a pro rata basis.The cost of publishing prospectus and stamp duty ($29,000) was also paid on 15 August. Other legal fees of $7,000 were paid on this date too.
All outstanding allotment money was received by the due date above.The Call 1 was made on 1 May 2018 with money due by 15 June. Subsequently Call 2 was made on 1 July 2018 with money due by 30 July 2018. All money was received on the due dates except for the holder of 15,000 shares who failed to meet both call 1 & 2. On 1 September 2018, as
provided for in the constitution, the directors decided to forfeit these shares. They were reissued, on 15 September 2018, as paid to $8 for $6 cash with a brokerage fee of $4,000. The balance of the forfeited shares account (after the reissuing share costs) was returned to the former shareholder on 30 September 2018.
Required
Prepare the journal entries to record the transactions of ChiHerbal Ltd up to and including that which took place on 30 September 2018. (Show all workings and narrations are compulsory)
Scenario 2 Property, Plant and Equipment
The end of the reporting period for ChiHerbal Ltd is 30 June. The company depreciates all depreciable assets using the straight-line method.
Answer:
Scenario 1- Financing company operations
|
Date 1/7/2017 1/8/2017 1/8/2017 15/8/2017 30/8/2017 1/05/2018 15/06/2018 15/06/2018 15/06/2018 |
Particulars Bank A/c To Equity Share Application A/c (Being cash received on applications) Equity Share Application A/c Equity Share Allotment A/c To Equity Share Capital (Being 500000 shares allotted) Equity Share Application A/c To Equity Share Allotment A/c To Calls in Advance A/c (Being allocation of application across allotment and calls in advance) Share issue costs A/c To Bank (Being payment done on prospectus, stamp duty and legal fees) Bank A/c To Equity Share Allotment A/C (Being cash received on allotment) Call 1 A/c To Equity Share Capital ( Being call of $ 1.5 per share) Calls in Advance A/c To Call 1 ( Transfer of calls received in advance) Bank A/c To Call 1 A/c ( Being cash received on 485000 shares) Equity Share Capital A/c To Call 1 Share Forfeiture A/c (Being 15000 shares forfeited) |
LF |
Dr 2100000 1500000 1250000 600000 36000 600000 750000 150000 727500 105000 |
Cr 21000000 2750000 350000 250000 36000 600000 750000 150000 727500 22500 82500 |
|
15/06/2018 1/07/2018 30/07/2018 30/07/2018 30/07/2018 1/9/2018 1/9/2018 |
Bank A/c Share Forfeiture A/c To Share Capital A/c ( Reissue of shares forfeited) Call 2 A/c To Equity Share Capital (Being call on $ 1 per share) Calls in Advance A/c To Call 2 (Transfer of calls received in advance) Bank A/c To Call 2 A/c (Being cash received on 48500 shares) Equity Share Capital A/c To Call 2 Share Forfeiture A/c (Being 15000 shares forfeited) Bank A/c Share Forfeiture A/c To Equity Share Capital (Reissue of shares forfeited) Share Forfeiture A/c To Bank A/c (Refund to former shareholders) |
75000 30000 500000 100000 485000 120000 90000 30000 127500 |
105000 500000 100000 485000 15000 105000 120000 127500 |
Working Notes-
|
No. of Shares applied for |
No. of Shares Allotted |
Money Received |
Application |
Allotment |
1st Call |
2nd call |
|
100 000 |
100 000 |
800000 |
300000 |
250000 |
150000 |
100000 |
|
500 000 |
400 000 |
1300000 |
12000000 |
100000 |
- | |
|
600 000 |
500 000 |
2100000 |
$1500000 |
$350000 |
$15000 |
10000 |
Scenario 2- Property, plant and equipment
|
Date |
Particulars |
LF |
Dr |
Cr |
|
1/4/2017 30/06/2017 30/06/2017 31/8/2017 1/9/2017 1/3/2018 30/6/2018 30/6/2018 |
Truck A A/C Dr To Cash A/c (Being truck bought for cash $ 90000) Equipment A/c Dr To Cash A/c (Being equipment bought for cash) Depreciation on Truck A A/c Dr To Profit and Loss A/c (Being depreciation provided at year end) Truck A A/c Dr To Cash A/c (Being expenses debited to truck) Asset Revaluation Surplus A/c Dr To Equipment A/c (Being reduced value of equipment transferred to asset revaluation A/c) Truck A A/c Dr To Cash A/c (Being truck A sold in cash) Equipment A/c Dr To Asset Revaluation Surplus A/c (Being increased value of equipment transferred to asset revaluation) Depreciation on Equipment A/c Dr To Profit and Loss A/c (Being Depreciation provided at year end) |
90000 140000 4000 2500 22667 59000 16979 11979 |
90000 140000 4000 2500 22667 59000 16979 119379 |
Workings
Cost of equipment on 30th June 1,40,000
Less: Depreciation for 2 months 23333
(1,40,000/10= 14000 * 2/12)
WDV on 1st September 1,37,667
Less: Fair Value on 1st September 115000
Amount to be debited to Asset Revaluation 22667
Fair Value of Equipment on 1st September 115000
Less: Depreciation for yr end ( 10 months) 11979
WDV on 30th June 103021
Fair Value of the equipment on 30th June,2018 120000
Amount to be credited to Asset Revaluation (1,20,000-1,03,021)=16979
Calculation of Depreciation
2017- on Truck A- (90000-10000)/5 * 3/12 = 4000
2018- on equipment- (115000)/8 * 10/12- 11979
Scenario 3- Lease
- a) Lease payments
PV OF Chiherbal Ltd- 8000* 3.8896 + 2160 * 0.6499= 32520
Schedule of lease payments
|
Date |
MLP |
Interest expense |
Liability reduction |
Liability reduction |
|
1st July 2017 1st July 2017 1st July,2018 1st July, 2019 1st July, 2020 1st July,2021 1st July, 2022 |
8000 8000 8000 8000 8000 2160 |
2207 1685 1117 498 4133 |
8000 5793 6315 6883 7502 (1973) |
32520 24520 18727 12412 5529 (1973) |
|
Date |
Particulars |
Dr |
Cr | |
|
30th June,2018 30th June,2019 |
Leased Machine A/c Dr To Lease Liability A/c (Being initial recognition of finance lease) Lease liability A/c Dr To Cash A/c (Being Initial lease liability recognised) Lease liability A/c Dr Interest expense A/c Dr To Cash A/c (Being first lease payment paid) Depreciation Expense A/c Dr To Accumulated Depreciation A/c (Being depreciation provided at year end between 31st December and 30th June) Lease Liability A/c Dr Interest expense A/c Dr To Cash A/c (Being second lease payment paid) Depreciation Expense A/c Dr To Accumulated Depreciation |
32520 8000 5793 2207 2069 6315 1685 4337 |
32520 8000 8000 2069 8000 4337 |
ChiHerbal Ltd
Journal entries
|
Date |
MLR |
Interest [email protected] 9% |
Receivable reduction |
Receivable Balance |
|
1st July 2017 1st July 2017 1st July,2018 1st July, 2019 1st July, 2020 1st July,2021 |
8000 8000 8000 8000 8000 |
2459 1960 1417 824 |
8000 5541 6040 6583 7176 |
35322 27322 21781 15741 9158 1982 |
Cessnock Ltd(lessor)
Schedule of Lease receipts
|
Particulars |
Dr |
Cr | ||
|
30th June, 2018 30th June,2019 |
Lease Receivable A/c Dr To Sales A/c (Being Initial recognition of lease receivable) Cost of Sales A/c Dr To Inventory (Being recording sale of machine) Cash A/c Dr To Lease Receivable A/c To Interest receivable (Being 1st payment received) Cash A/c Dr To Lease Receivable A/c To Interest receivable (Being 2nd payment received) |
1 |
35322 31000 8000 8000 |
35322 31000 5541 2459 1960 6040 |
Cessnock Ltd
Journal entries
scenario 4-Intangible Assets
Amount of development cost- 500000 + 380000= 880000
According to IAS 38 , both the cost of software development 380000 and cost of computer equipment are capitalised while the cost of computer equipment is recognized as an expense(Lim, Macias & Moeller 2018).
According to IAS 38 any operating cost or cost of hardware are capitalised.Also internally developed charge or expense relating to technological feasibility, probable future benefits and the ability to use and sell the software form a part of capitalised expenditure. Hence the above costs has been treated as capitalized(Saunders & Brynjolfsson,2016).
References:
Lim, S. C., Macias, A. J., & Moeller, T. (2018). Intangible assets and capital structure.
Saunders, A., & Brynjolfsson, E. (2016). Valuing Information Technology Related Intangible Assets. Mis Quarterly, 40
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