Question

Question 4

New Territory Ltd makes an initial public offering to potential investors to subscribe for 10 million shares. The issue price of the shares was $2.00 per share. Applications for shares had to be received by close of business on 15th July 2019. $1.00 was due on application with another $1.00 being payable within one month of allotment. Applications for 11 million shares were received by 15th July 2019. The terms of issue allowed the directors to allot shares to subscribers on a pro rata basis, with any excess that was paid on application being set against the amount due on allotment. Allotment of the shares took place on 20th July 2019. All shareholders paid the amount due on allotment with the exception of the holders of 1 million shares who failed to make their payments due within the one month due date of 20th August 2019. The directors forfeited the 1 million shares on the 31st August which were then auctioned as fully paid. At the auction $1.50 was received for each share sold. After the discount on reissue the remaining application balance on the forfeited shares was returned to the original applicants.

Required: Provide full journal entries to account for the above events

Answer 1