Peterson Company is issuing 4 000 ordinary shares,payable by instalments.Investors must pay $10 per share on application,$5 per share on allotment and there will be a final call of $2 payable at a later date to be determined by directors.The journal entry to record the final call by directors will include:

Question

Quizplus · Accepted Answer

The final call is not yet paid by the investors and therefore cannot be recorded as cash. It is also not an application or a trust bank account. The final call is an amount owed by the shareholders to the company and will increase the share capital. Therefore, a credit to Ordinary share capital is the appropriate entry.

Peterson Company Is Issuing 4 000 Ordinary Shares,payable by Instalments