Solution: 04: Paid Rs. We hope this handbook will help you apply the complex accounting and valuation requirements of this standard to share-based payment transactions. 10 each (face value) are issued for Rs. 75 called-up, issued at 10% premium (to be paid at the time of allotment) for non-payment of a first call of Rs. 57,500 cash and Rs. shares. In this example, no other features exist that would result in financial liability 10 each at Rs. ADVERTISEMENTS: In this article we will discuss about the Journal Entries on Issue of Shares for Consideration Other than Cash. Determine the underwriter’s liability and pass journal entries in the books of company 2. 1 The new shares are issued, but no formal journal entry is made. The following entries will be pass The issue is at par. To Share Capital Account. 22 on the date of allotment of bonus shares. 60 per share. The entry to record this transaction is: Kim Heng Anthony Voigt . Instead, a memorandum entry records the issue of the new shares. Hence, an applicant for 2 shares will receive 1 share. 10 only. The company received applications for 45,000 shares of which applications for 5,000 shares were rejected and the money refunded. Journal Entry of Issue of Shares at a Premium - Illustration. All the shareholders paid up to the second call except Sachin, the allottee of 2,000 shares, failed to pay the final call. - An entity issues shares or share options to its supplier for the purchase of goods. Note: The market value of Rs. Give journal entries under each of the following assumptions separately. Equity 472 As per the terms of the issue of shares, $1.5 per share was to be received in full from the applicants on 30 November 20X3. 4. To illustrate, assume that the DeWitt Corporation, which is authorized to issue 10,000 shares of common stock without par value, assigns a stated value of $20 per share to its stock. B Journal Entries 713 Debit Credit Impaired goodwill expense xxx Goodwill xxx Increased Investment in Subsidiary If the acquiring entity does not initially purchase all outstanding shares of an acquiree but later purchases additional shares, then the additional payment is recorded as an increase in the investment in the subsidiary. Shares are quoted at Rs. The issue price of these shares is normally debited to ‘Goodwill A/c’ and journal entry is made as follows : In case a company does not have sufficient funds for the purchase of fixed assets or for payment to creditors it may offer and allot its shares to vendors/ creditors in lieu of cash. Article shared by. For example, shares of Rs. 2. Share Allotment Account. l state that shares may be issued at par, at premium, and at discount; l make journal entries to record the isssue of shares; l explain the terms calls in arrears and calls in advance. If 6,000 shares are issued at $12.50 each; Required: Journal entries in the books of Delight Corporation. 6 per share including premium and balance in two calls in equal amount. Give journal entries for forfeiture and re-issue of shares: (a) X ltd. forfeited 500 shares of Rs. KPMG’s global IFRS employee benefits leadership team Applications received from public for 8,000 shares. The share purchase warrants are classified as equity instruments because a fixed amount of cash is exchanged for a fixed amount of equity. For redemption, 4000 equity shares of Rs.10 each are issued at 10% premium. Give Journal entries to record the above transaction. 75 paid-up for Rs. Solution: Noor Khan Limited Company was established with Authorized Capital of 100,000 shares and invited applications for 10,000 shares of 10 each at premium of Rs. All the shares were applied for and allotted. 2 per share as fully paid up. Problems 2: Prepare general journal entries for the following transactions of a business called Pose for Pics in 2016: Aug. 1: Hashim Khan, the owner, invested Rs. 5. This is Pro-rata allotment. The shares may be issued either at par, at premium or at a discount. 07: Services are performed and clients are billed for Rs. Share can be issued at par, at premium. Pass the necessary journal entries for the issue of … 75 called-up, issued at 10% premium (to be paid at the time of allotment) for non-payment of a first call of Rs. Give journal entries for forfeiture and re-issue of shares: (a) X ltd. forfeited 500 shares of Rs. The remaining options lapsed. App. 15 per share. (A) Journal Entries of Share Capital Transactions 1. 75 paid-up for Rs. If 7,500 shares are issued at $10 each. Company A joint stock company is an artificial person, created by law, having separate entity distinct from its members with a perpetual succession and a common seal. Out of these, 200 shares were re-issued as Rs. Question 44. Amount due was duly received. Accounting for Share Capital – CBSE Notes for Class 12 Accountancy Topic 1: Introduction 1. 10,000. When the company decides to allot the shares at pro-rata basis, then it has to allot 10000 shares to the applicants of 20000 shares. Problem 5: Forfeiture and Reissue of Shares Journal Entries. Each option allows the holder to subscribe for one ordinary share at an exercise price of $3.60 per share on or before 1 July 2017. Journal Entries (A) (1) Upon the sanction of an issue of bonus shares (a) Debit Profit & Loss Account Debit General Reserve Account Out of these, 200 shares were re-issued as Rs. FORFEITURE OF SHARES• Case 3 when shares are issued originally at DISCOUNTShare Capital A/C Dr. (Called UP Money)Discount on Issue of Shares Dr. (discount amount) To Share Allotment A/c (Arrear on Allot) To Share Calls in Arrear A/C (Arrear on Calls) To Share Forfeiture A/C (Money Received) A Presentation By Himanshu Arya,2/11/2012 Daksh Professional Education … 100 each, Rs. The oversubscription of $1,500,000 was returned to unsuccessful applicants on 20 December 20X3. substantial reserves in comparison to their paid up capital issue Bonus Shares to capitalize the reserves for which the certain norms/conditions and criteria may be followed and fulfilled. Answer: Hi Sarah and thanks for your question. DeWitt issues the 10,000 shares for cash at $ 23 per share. The fair value for the shares at the date of issue is $800,000. By 1 July 2017, 40 000 of the options issued in (4) above were exercised and shares were issued. The journal entries to record the effect of share options are as follows: 31 December 20X2 $’000 $’000 Dr. 3 per share, on allotment Rs. Prepare Cash Book and pass necessary journal entries to record the above issue of shares and show how the Share Capital will appear in the Balance Sheet. preference shares at par, by issue of sufficient number of equity shares of Rs. A bonus issue of equity share was made at par, two shares being issued for every five held on that date. 1. Pass the necessary journal entries for the above in the books of Rama Ltd. (ii) On 1st April, 2018, Sakshi Ltd. issued 1,000, 11% Debentures of ₹ 100 each at a discount of 6%, redeemable at a premium of 5% after three years. ABC Ltd. has a Canadian dollar functional currency. You are required to pass necessary Journal Entries including cash transactions in the books of the company. Show the journal entries to record the above transactions. Gemini Ltd. came up with public issue of 30,00,000 Equity shares of Rs. To issue 50 000 options, at an issue price of 75c per option. Chapter 8 • Company Accounts—Accounting for Share Capital 8.31 Tass Journal entries for issue of shares under each of the following cases: (d) Allotted 1,00,000 shares in full to selected applicants and the applications for the remaining 3,00,000 shares were rejected. 6. 20 per share. 20 per share. 10 each at a premium of Rs. It is also known as the Nominal value or denomination of a share. Issue of shares at par: When shares are issued for an amount equal to the face value of shares, they are said to be issued at par. 2. 2:1. 32,500 of photography equipment in the business. A. Employee benefits expense (Staff costs) 472 Cr. Preference shares are redeemed on 1-4.08 at a premium of Rs.2 per share. Company issues the prospectus during initial public offering. All the person who satisfied with company's written terms and objectives in the prospectus, may apply for getting shares. Learn about the correct procedure of Journal Entries for Issue of Shares. Journal Entries in various cases 1. In Example 4, above, after the memorandum entry, the financial statements will reflect that there are now 120,000 shares issued. Pass Journal Entries for the above transactions in the books of Khandelwal Co. Ltd. illustrative examples and journal entries to elaborate or clarify the practical application of IFRS 2. State the journal entries required to account for the above transactions. When a company purchases any fixed asset or business and makes the payment to the vendor in form of issue of shares in place of cash it is called the issue of shares for consideration other than cash. 23.1 PROCEDURE OF ISSUE OF SHARES Face value of a share is the par value of the share. When company gets Application Money For doing business, company need big money. • CA06 s610(2) – when issuing shares at a premium, you can use the premium to write off • The expenses of the issue of those shares • Any commission paid on the issue of those shares • CA06 s610(3) – to issue fully paid bonus shares (scrip issue) • CA06 s710 - payment of a permissible capital payment if doing a Thus, the ratio will be 20000:10000 i.e. 5 per share payable as: On application Rs. ... For this, the company will pass the following entry . Q44. A total amount of $3,000,000 was received. A company may issue shares for consideration other than cash. 22 per share has not been considered because entries are to be recorded at the issue price in the books of the company. Total issue of 10,000 shares of Rs. It may, for example, purchase some fixed assets for which it may make payment in the form of shares… 2 The new shares are issued at a price to be decided by a directors’ resolution. Shares issued for consideration other than cash Sometimes a company purchases some assets from the vendor and instead of paying the vendor in cash, the company may decide to issue shares to vendors is known as issue of shares for consideration other than cash shares can be issued to vendors at par, premium. Preference Shares are payable ₹ 25 on application, ₹ 25 on allotment and ₹ 50 on first and final call. 3,000 cash for an insurance policy covering the next 24 months. 60 per share. Characteristics or Features of a Company (i) Artificial person (ii) Voluntary association […] Journal Entries Examples for Issue of Shares. Jupiter Company Limited issued 35,000 equity shares of Rs.10 each at a premium of Rs.2 payable as follows: On Application Rs.3 On Allotment Rs.5 (including premium) Balance on First and Final Call The issue was fully subscribed. 10/- each underwritten by Mr. X @ 4% commission. Illustration 2: Journal entries for issue of shares to vendors/consideration other than cash 100 each, Rs. How would you write this in a journal entry: a company issued 2,660 shares of its common stock after $31,360 in cash and computer equipment with a fair market value of $43,120 were received.