Financial accounting II

Topic-Issue of share
Case I-Offered share to public along with application at par value

ABC and Company limited invited applications for 100,000 shares of Rs. 10 each on January 1 st
2013

Required: Give entries in journal to record the issuance of share under each of the following
situations separately

i. The company banker’s received applications for 100,000 shares of Rs. 10 each the directors
of the company finalized the allotment of 100,000 shares to public. (exact-subscribed)
ii. The company banker’s received applications for 120,000 shares of Rs. 10 each the directors
of the company finalized the allotment of 100,000 shares to public and refund the amount
received in excess.(over-subscribed)
iii. The company banker’s received applications for 90,000 shares of Rs. 10 each the directors
of the company finalized the allotment of 90,000 shares to public and hand over 10,000
undersubscribed share to underwriters as per agreement.(Under-subscribed)

Practice of case I

ABC and Company limited invited applications for 200,000 shares of Rs. 20 each on January 1 st
2013

Required: Give entries in journal to record the issuance of share under each of the following
situations separately

i. The company banker’s received applications for 200,000 shares of Rs. 20 each the directors of
the company finalized the allotment of 200,000 shares to public. (exact-subscribed)
ii. The company banker’s received applications for 240,000 shares of Rs. 20 each the directors of
the company finalized the allotment of 200,000 shares to public and refund the amount
received in excess.(over-subscribed)
iii. The company banker’s received applications for 180,000 shares of Rs. 20 each the directors of
the company finalized the allotment of 180,000 shares to public and hand over 20,000
undersubscribed share to underwriters as per agreement.(Under-subscribed)

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Question No. 1

M/s. Mustafa Limited incorporated with authorized capital of 9,000,000 divided into 900,000
ordinary shares @ 10 each. The minimum subscription Limited stated in the memorandum
was Rs 650,000. The company offered 65,000 shares of Rs.10 each at par value. The
company bankers received applications for 60,000 ordinary shares @ 10 each. The directors
of the company finalized the allotment of 60,000 shares to general public and 5000 under
subscribed shares taken by underwriters as per agreement.

Question No. 2

SASI Corporation has an authorized capital of Rupees5,000.000 divided into 50,000 ordinary
shares of Rs. 10 each.
May 1, the corporation issue 30,000 ordinary shares for public subscription.
4, The Corporation Bank informed that 38,000 applications were received along with Rs.10
each.
. 10, the directors of the company finalized the allotment of the shares and advice the bank to
refund the excess money of the unallotted shares.
Required:

1. Give dated entries in general journal to record the above events.

2. Prepare an initial balance sheet as at January 31st, 2010.

Question No.3

Yousaf Industries Limited was registered with an authorized capital of Rs. 2,000,000 divided
into 200,000 ordinary shares of Rs. 10 each. The minimum subscription Limited stated in the
memorandum was Rs 800,000. the company offered 80,000 shares of Rs.10 each at par value.
Record the above transactions in the books of the company and show how will it be shown in the
balance sheet of company if:

a) Applications for exactly 80,000 shares were received(a rare situation).

b) Applications for 95,000 shares were received( a case of over subscription).

Question No.4

On May 1,2002 Salman & Co. Ltd. offered 40,000 ordinary shares @ Rs. 10 each for public
subscription. On May 3, 2002 (the closing date for applications) it is made known to the
company that applications were received for Rs. 35,000 shares. The 5,000 shares not taken by
the public and as per agreement, taken up by the underwriters. On May 20, 2002 the company
allotted the shares. Pass the journal entries.

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 Question No.5 The Oriental trading Corporation was registered on March 1, with Registered
capital of Rs. 500,000 which is divided into 50,000 Ordinary shares of Rs. 10 each. On March 6,
the corporation Issued 30,000 share initially to the public for subscription, payable full amount or
Rs. 10 along with each application. The corporation bank informs on March 15, that 38,000
applications were received @ Rs. 10 each. on March 25, the directors of the company finalize the
allotment of shares and advise the bank to refund the excess money to the unallotted 8,000
applicants.

Case II- Offered share to public along with application at Market value

ABB and Company limited invited applications for 150,000 shares of Rs. 10 at Rs. 12 each on
January 1st 2014

Required: Give entries in journal to record the issuance of share under each of the following
situations separately

i. The company banker’s received applications for 150,000 shares

ii. The company banker’s received applications for 180,000 shares
iii. The company banker’s received applications for 135,000 shares

Practice Case II- Offered share to public along with application at Market value

ABB and Company limited invited applications for 300,000 shares of Rs. 20 at Rs. 24 each on
January 1st 2014

Required:

Give entries in journal to record the issuance of share under each of the following situations
separately

i. The company banker’s received applications for 300,000 shares

ii. The company banker’s received applications for 360,000 shares
iii. The company banker’s received applications for 170,000 shares

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 Case III- Issue of share on cash
i. The Co. issued 20,000 share @ Rs. 10 each on cash
ii. The Co. issued 150,000 share @ Rs. 10 at Rs. 13 each on cash
iii. Received cash Rs. 250,000 by the issuance of 20000 shares at par.
iv. The Co. issued 22,000 share @ Rs. 10 at Rs. 9 each on cash
v. Received cash Rs. 180,000 by the issuance of 20000 shares at par.

Practice Case III- Issue of share on cash

i. The Co. issued 40,000 share @ Rs. 20 each on cash

ii. The Co. issued 300,000 share @ Rs. 20 at Rs. 26 each on cash
iii. The Co. issued 44,000 share @ Rs. 20 at Rs. 18 each on cash

Case IV-Issue of share in consideration of assets other than cash

i. Purchased of furniture for Rs. 210,000 and issued 20,000 shares @

Rs. 10 each.
ii. Purchased of machinery for Rs. 300,000 and issued 32,000 shares @
Rs. 10 each.
iii. Purchased equipment by the issuance of 10,000 shares of Rs. 10
each at Rs. 14 each.
iv. Purchased of land by the issuance of 20,000 shares of Rs. 10 each at
Rs. 9 each.

Practice Case IV-Issue of share in consideration of assets other than cash

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 i. Purchased of furniture for Rs. 400,000 and issued 40,000
shares @ Rs. 20 each.
ii. Purchased of machinery for Rs. 600,000 and issued 64,000
shares @ Rs. 10 each.
iii. Purchased equipment by the issuance of 20,000 shares of Rs.
10 each at Rs. 12each.
iv. Purchased of land by the issuance of 40,000 shares of Rs. 20
each at Rs. 18 each.

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 Case V-Issue of Debenture

i. Issued 2,000 10% 4 year debenture of Rs. 100 each.

ii. Issued 4,000 11% 7 year debenture of Rs. 100 each issued at Rs. 120
each.
iii. Issued 2,000 12% 3 year debenture of Rs. 100 each issued at
Rs. 90 each.
iv. Issued 1,000 10% 5 year debenture of Rs. 100 each
repayable at Rs. 135 each.

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 v. Issued 2,000 12% 7 year debenture of Rs. 100 each
issued at Rs. 120 each repayable at Rs.140 each.
vi. Issued 3,000 13% 3 year debenture of Rs. 100 each
issued at Rs. 90 each repayable at Rs.125 each.

Practice Case V-Issue of Debenture

i. Issued 4,000 10% 4 year debenture of Rs. 100 each.
ii. Issued 8,000 11% 7 year debenture of Rs. 100 each issued at
Rs. 120 each.
iii. Issued 4,000 12% 3 year debenture of Rs. 100 each issued at
Rs. 90 each.
iv. Issued 2,000 10% 5 year debenture of Rs. 100 each
repayable at Rs. 135 each.
v. Issued 4,000 12% 7 year debenture of Rs. 100 each issued at
Rs. 120 each repayable at Rs.140 each.
vi. Issued 6,000 13% 3 year debenture of Rs. 100 each issued at
Rs. 90 each repayable at Rs.125 each.

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