Question

Kary Inc decides to sell shares to raise added capital to allow for plant expansion. wary Inc’s executives decide to issue shares through a subscription basis. Kary offers 30,000 common shares at $16 per share. The terms of the subscription are 25% down and the balance at the end of 4 months. Assume that only the down payment ismade and that the subscribers don’t pay the balance. The company has the policy of giving a refund for the amounts received.

Required:

Give journal entries for the following:

1. the original subscription
2. the collection of the down payment
3. the forfeiture of the balance

4. if the company did not offer a refund of the deposit nor did it issue any shares, what would the journal entry look like?

Answer 1

jouranal entries as follows

A. accounts recivable.......debit ($16*30000) 480000.

common share.............credit 480000.

(being common stock issued)

B.cash a/c ......debit (16*25%*30000)= 120000

common share ....credit..................120000

(being cash collected from dwon payment)

C.common share.....debit. 120,000

cash......................credit 120,000

(being cash refunded to the subscriber as per company policie)

soloution to part b

common share.......debit($16*30,000)= $480,000

called up ....credit(16*25%*30,000) = $120,000

common share forfeiture ( 480,000 -120,000)= 360,000

(being the share forfeiture & dont refund any money or nor issue any share)