Calls in arrear and calls in advanced EXAMPLE 4 solution

Example 4:

D &D Co Ltd Issued 100,000 ordinary shares of TAS 1,000at a premium of shs. 200 payable as follows

-    On    application shs 400

-    On    allotment shs 500

-    On    first call shs 200

-    On    final call shs 100

Applications were received for 120,000 shares, out of these; applications for 20,000 were rejected and got refunded immediately. The remaining applicants were allotted shares in full. Payments for allotment and first call (when the balance was made) were received in full except for

(a)    Ally holder of 2,000 shares failed to pay for both allotment and first call

(b)    Bakari holder of 3,000shares failed to pay for first call However, Chale. a holder of

5,000shares paid his first call money plus final call The Balance sheet of D&D Co Ltd Was made up before the final call was made

REQUIRED:

(i) Journal entries to record the above

(II) The statement of Financial Position of D &D Co Ltd

(i). Solution journal entries to record 

                                       Journal entries

DETAILS	Dr	Cr
ON APPLICATION
Cash[120,000x400sh]	48,000,000
Application and allotment [120,000x400sh]		48,000,000
REFUND REJECTED APPLICATIONS
Application and allotment [20,000 x (400) ]	8,000,000
Cash [20,000 x 400]]		8,000,000
ALLOTMENT
Application and allotment (100000x[400+500])	90,000,000
share capital (100000x700)		70,000,000
Share premium(100000x200)		20,000,000
ALLOTMENT MONEY
Cash(100000-2000)x500	49,000,000
Application and allotment		49,000,000
Calls in arrear(2000x500)	1,000,000
Application and allotment		1,000,000
FIRST CALL
First call	20,000,000
Share capital		20,000,000
Rec. First call money
Cash(100,000-2000-3000)x200	19,000,000
First call		19,000,000
Calls in arrear(3000+2000)x200)	1,000,000
First call		1,000,000
Cash.Final call(5000x100sh)	500,000
Call in advance		500,000
FINAL CALL
Final call(100000x100)	10,000,000
Share capital		10,000,000
final call money
Cash(100000-2000-3000-5000)x100	9,000,000
final call(100000-2000-3000-5000)x100		9,000,000
total

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Note: if one fails to pay for allotment, automatically he/she/it cant pay for other calls hence his/hers/its arrears preceeds all following calls