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HOLMES

INSTITUTE

FACULTY OF
HIGHER
EDUCATION

HA2032 Corporate Accounting


Trimester 2 / 2010

ASSESSMENT 1

Monster Ltd was registered two years ago with a share capital of 20,000 $1 ordinary
shares. The directors required capital for expansion purposes and decided to undertake
a share issue.

The prospectus, issued on 1 February 2012, sought capital from the issue of 300,000
ordinary shares at a nominal value of $1 each, payable as follows:
• $0.75 on application ; and
• $0.25 on allotment.

On 15 April 2012 applications had been received for 350,000 shares with application
money. (The prospectus did not allow the directors to retain excess application monies).
On 25 April 2012 directors allotted shares and made refunds.
On 30 June 2012 all allotment monies had been received.
On 31 December 2012 another prospectus was issued offering 100,000 $5 preference
shares payable $3 on application and $2 on allotment.
By 28 February 2013 the closing date for applications, offers for 150,000 preference
shares had been received.
On 15 March 2013 the directors issued the preference shares to successful applicants
and made appropriate refunds. Allotment money was due by 31 May 2013.
All allotment money was received by the due date.

On 1 March 2013 Monster Ltd issues a prospectus inviting applications for 9000
debentures at par value of $100 payable in full on application. Terms of issue were
7%pa interest payable six monthly with a maturity date of 1 April 2015.
Applications for 9250 debentures, fully paid, had been received by the closing date of 1
April 2013.
On 4 April 2013 the directors allotted 9000 debentures. Money for the oversubscription
was refunded.

On 1 October 2013, the first six monthly interest payment on the debentures was paid,
and a dividend of 5 cents per preference share was declared and paid.

Required:

a) Prepare the journal entries to record all transaction involved in the:


• Issue of ordinary shares;
• Issue of preference shares;
• Issue of debentures; and
• Interest payment and dividend payment.

HA2032 Corporate Accounting T2 2010


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b) Prepare the shareholders’ equity section ONLY of the Statement of Financial
Position (Balance Sheet) for Monster Ltd as at 1 October 2013.

Undergraduate Program HA2032 Corporate Accounting 2

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