Exam 2: Financing Company Operations

Bellvista Limited issued 20 000 share options to subscribe for ordinary shares.The exercise price on the options was $5 per share.If all options were exercised by the due date,the following journal entry would be recorded for the issue of the shares.

In the case of a share issue being oversubscribed,any amount kept by the company for future calls is credited to a Calls in Advance account,which is reported as an addition to share capital in the financial statements.

ABC Ltd was registered as a company on 1 July 2013.On 4 July 2013,ABC Ltd issued a prospectus offering 250 000 ordinary shares at an issue price of $3.50 each,payable $2.50 on application and $1.00 on allotment.Applications closed on 1 August 2013 with the company having received applications for 300 000 shares.The shares were allotted on 15 August 2013,with the over-subscription amount being refunded to unsuccessful applicants.All allotment money was received by 31 August 2013.Following the allotment,the balance in the share capital account would be:

Share options issued at no cost to the recipient are accounted for in the same way as a rights issue.

Section 124 of the Corporations Act places a restriction on the private placement of shares,limiting to 15% of existing capital the amount of capital that a company can issue in any one year without prior shareholder approval.

XYZ Ltd was registered as a company on 1 July 2013.On 4 July 2013,ABC Ltd issued a prospectus offering 200 000 ordinary shares at an issue price of $5.00 each,payable $3.00 on application and $2.00 on allotment.Applications closed on 1 August 2013 with the company having received applications for 220 000 shares.After application but prior to allotment,the balance in the application account would be:

Brown Limited was incorporated on 1 July 2013.A prospectus offering 200 000 shares at $3.00 each was released and closed fully subscribed.The share issue was underwritten by a broker for $25 000 and other costs of the share issue amounted to $13 000.The net share capital on the statement of financial position is:

Which of the following journal entries shows the correct accounting treatment for share issue costs?