Malaysia Company Ltd decided to issue 200 000 ordinary shares for $2.10c each, payable in instalments, 40c on application, $1 on allotment and the balance payable at the discretion of the company. Applications were received for 220 000 shares. The shares were allotted by the directors at a meeting held a week after the close of applications and refunds were made for 20 000 shares. The correct journal entry to record the amount due to the company for the allotment instalment is which of the following?

Question

Quizplus · Accepted Answer

The amount due to the company for the allotment instalment is $1 per share, which is payable on allotment. As 200,000 shares were allotted, the total amount due is $200,000. Therefore, the correct journal entry is to debit allotment account with $200,000 and credit share capital account with $200,000. Option D is the only choice that presents this journal entry.

Malaysia Company Ltd Decided to Issue 200 000 Ordinary Shares