Broadbeach Ltd was registered on 28 December 20X0.Broadbeach Ltd has a financial year end of 31 March.On 29 December 20X0 it lodged a prospectus with ASIC inviting investors to acquire 3 000 000 shares.By the closing date of 28 February 20X1 applications for 9 000 000 shares had been received.During March 20X1 the directors allotted the 3 000 000 shares to the applicants in proportion to the number of shares originally applied for.The terms of the issue are as follows:
 issue price of $10.00 per share
 $4.00 payable on application
 $4.00 payable on allotment
 $1.00 payable on 30 June 20X1
 $1.00 payable on 31 December 20X1
-Show the journal entries for the financial year ended 31 March 20X1 in relation to the refund for the oversubscribed shares, assuming that the company can apply applications to the allotment, but can not apply applications to calls in advance.

Question

Broadbeach Ltd was registered on 28 December 20X0.Broadbeach Ltd has a financial year end of 31 March.On 29 December 20X0 it lodged a prospectus with ASIC inviting investors to acquire 3 000 000 shares.By the closing date of 28 February 20X1 applications for 9 000 000 shares had been received.During March 20X1 the directors allotted the 3 000 000 shares to the applicants in proportion to the number of shares originally applied for.The terms of the issue are as follows:
  issue price of $10.00 per share
  $4.00 payable on application
  $4.00 payable on allotment
  $1.00 payable on 30 June 20X1
  $1.00 payable on 31 December 20X1
-Show the journal entries for the financial year ended 31 March 20X1 in relation to the refund for the oversubscribed shares, assuming that the company can apply applications to the allotment, but can not apply applications to calls in advance.

Quizplus · Accepted Answer

The company received applications for 9,000,000 shares but only allotted 3,000,000 shares. The excess application money for 6,000,000 shares (6,000,000 x $4 = $24,000,000) needs to be refunded. The journal entry to record the refund is to debit the Application account and credit the Bank Trust account for the excess amount of $12,000,000 (since $24,000,000 was initially received and $12,000,000 is retained for the allotted shares).

Broadbeach Ltd Was Registered on 28 December 20X0