$3 on application (due by 1 August 2017)
$2.5 on allotment (due by 30 August 2017)
$1.5 on Call 1 (due by 15 June 2018)
$1 on Call 2 (due by 30 July 2018)
Application has been closed and by 1 August 2017, 600,000 shares have been applied for of which applicants for 100,000 shares forwarded the full $8 per share, and the reminder paid application money only.On 15 August, directors decided to allot shares in full to applicants who had paid the full amount and to all remaining applications on a pro rata basis.The cost of publishing prospectus and stamp duty ($29,000) was also paid on 15 August. Other legal fees of $7,000 were paid on this date too.
All outstanding allotment money was received by the due date above.The Call 1 was made on 1 May 2018 with money due by 15 June. Subsequently Call 2 was made on 1 July 2018 with money due by 30 July 2018. All money was received on the due dates except for the holder of 15,000 shares who failed to meet both call 1 & 2. On 1 September 2018, as
provided for in the constitution, the directors decided to forfeit these shares. They were reissued, on 15 September 2018, as paid to $8 for $6 cash with a brokerage fee of $4,000. The balance of the forfeited shares account (after the reissuing share costs) was returned to the former shareholder on 30 September 2018.
Required
Prepare the journal entries to record the transactions of ChiHerbal Ltd up to and including that which took place on 30 September 2018. (Show all workings and narrations are compulsory)
Scenario 2 Property, Plant and Equipment
The end of the reporting period for ChiHerbal Ltd is 30 June. The company depreciates all depreciable assets using the straight-line method.
Date
1/7/2017
1/8/2017
1/8/2017
15/8/2017
30/8/2017
1/05/2018
15/06/2018
15/06/2018
15/06/2018 |
Particulars
Bank A/c To Equity Share Application A/c (Being cash received on applications)
Equity Share Application A/c Equity Share Allotment A/c To Equity Share Capital (Being 500000 shares allotted)
Equity Share Application A/c To Equity Share Allotment A/c To Calls in Advance A/c (Being allocation of application across allotment and calls in advance)
Share issue costs A/c To Bank (Being payment done on prospectus, stamp duty and legal fees)
Bank A/c To Equity Share Allotment A/C (Being cash received on allotment)
Call 1 A/c To Equity Share Capital ( Being call of $ 1.5 per share)
Calls in Advance A/c To Call 1 ( Transfer of calls received in advance)
Bank A/c To Call 1 A/c ( Being cash received on 485000 shares)
Equity Share Capital A/c To Call 1 Share Forfeiture A/c (Being 15000 shares forfeited)
|
LF |
Dr
2100000
1500000 1250000
600000
36000
600000
750000
150000
727500
105000
|
Cr
21000000
2750000
350000 250000
36000
600000
750000
150000
727500
22500 82500
|
15/06/2018
1/07/2018
30/07/2018
30/07/2018
30/07/2018
1/9/2018
1/9/2018 |
Bank A/c Share Forfeiture A/c To Share Capital A/c ( Reissue of shares forfeited)
Call 2 A/c To Equity Share Capital (Being call on $ 1 per share)
Calls in Advance A/c To Call 2 (Transfer of calls received in advance)
Bank A/c To Call 2 A/c (Being cash received on 48500 shares)
Equity Share Capital A/c To Call 2 Share Forfeiture A/c (Being 15000 shares forfeited)
Bank A/c Share Forfeiture A/c To Equity Share Capital (Reissue of shares forfeited)
Share Forfeiture A/c To Bank A/c (Refund to former shareholders)
|
|
75000 30000
500000
100000
485000
120000
90000 30000
127500 |
105000
500000
100000
485000
15000 105000
120000
127500 |
Working Notes-
No. of Shares applied for |
No. of Shares Allotted |
Money Received |
Application |
Allotment |
1st Call |
2nd call |
100 000 |
100 000 |
800000 |
300000 |
250000 |
150000 |
100000 |
500 000 |
400 000 |
1300000 |
12000000 |
100000 |
- |
|
600 000 |
500 000 |
2100000 |
$1500000 |
$350000 |
$15000 |
10000 |
Date |
Particulars |
LF |
Dr |
Cr |
1/4/2017
30/06/2017
30/06/2017
31/8/2017
1/9/2017
1/3/2018
30/6/2018
30/6/2018 |
Truck A A/C Dr To Cash A/c (Being truck bought for cash $ 90000)
Equipment A/c Dr To Cash A/c (Being equipment bought for cash)
Depreciation on Truck A A/c Dr To Profit and Loss A/c (Being depreciation provided at year end)
Truck A A/c Dr To Cash A/c (Being expenses debited to truck)
Asset Revaluation Surplus A/c Dr To Equipment A/c (Being reduced value of equipment transferred to asset revaluation A/c)
Truck A A/c Dr To Cash A/c (Being truck A sold in cash)
Equipment A/c Dr To Asset Revaluation Surplus A/c (Being increased value of equipment transferred to asset revaluation)
Depreciation on Equipment A/c Dr To Profit and Loss A/c (Being Depreciation provided at year end) |
|
90000
140000
4000
2500
22667
59000
16979
11979 |
90000
140000
4000
2500
22667
59000
16979
119379 |
Workings
Cost of equipment on 30th June 1,40,000
Less: Depreciation for 2 months 23333
(1,40,000/10= 14000 * 2/12)
WDV on 1st September 1,37,667
Less: Fair Value on 1st September 115000
Amount to be debited to Asset Revaluation 22667
Fair Value of Equipment on 1st September 115000
Less: Depreciation for yr end ( 10 months) 11979
WDV on 30th June 103021
Fair Value of the equipment on 30th June,2018 120000
Amount to be credited to Asset Revaluation (1,20,000-1,03,021)=16979
Calculation of Depreciation
2017- on Truck A- (90000-10000)/5 * 3/12 = 4000
2018- on equipment- (115000)/8 * 10/12- 11979
Scenario 3- Lease
- a) Lease payments
PV OF Chiherbal Ltd- 8000* 3.8896 + 2160 * 0.6499= 32520
Schedule of lease payments
Date |
MLP |
Interest expense |
Liability reduction |
Liability reduction |
1st July 2017
1st July 2017
1st July,2018
1st July, 2019
1st July, 2020
1st July,2021
1st July, 2022 |
8000
8000
8000
8000
8000
2160
|
2207
1685
1117
498
4133 |
8000
5793
6315
6883
7502
(1973)
|
32520
24520
18727
12412
5529
(1973)
|
Date |
Particulars |
|
Dr |
Cr |
30th June,2018
30th June,2019 |
Leased Machine A/c Dr To Lease Liability A/c (Being initial recognition of finance lease)
Lease liability A/c Dr To Cash A/c (Being Initial lease liability recognised)
Lease liability A/c Dr Interest expense A/c Dr To Cash A/c (Being first lease payment paid)
Depreciation Expense A/c Dr To Accumulated Depreciation A/c (Being depreciation provided at year end between 31st December and 30th June)
Lease Liability A/c Dr Interest expense A/c Dr To Cash A/c (Being second lease payment paid)
Depreciation Expense A/c Dr To Accumulated Depreciation
|
|
32520
8000
5793 2207
2069
6315 1685
4337
|
32520
8000
8000
2069
8000
4337
|
ChiHerbal Ltd
Journal entries
Date |
MLR |
Interest Revenue@ 9% |
Receivable reduction |
Receivable Balance |
1st July 2017
1st July 2017
1st July,2018
1st July, 2019
1st July, 2020
1st July,2021
|
8000
8000
8000
8000
8000
|
2459
1960
1417
824
|
8000
5541
6040
6583
7176
|
35322
27322
21781
15741
9158
1982
|
Cessnock Ltd(lessor)
Schedule of Lease receipts
|
Particulars |
|
Dr |
Cr |
30th June, 2018
30th June,2019
|
Lease Receivable A/c Dr To Sales A/c (Being Initial recognition of lease receivable)
Cost of Sales A/c Dr To Inventory (Being recording sale of machine)
Cash A/c Dr To Lease Receivable A/c To Interest receivable (Being 1st payment received)
Cash A/c Dr To Lease Receivable A/c To Interest receivable (Being 2nd payment received)
|
1 |
35322
31000
8000
8000
|
35322
31000
5541 2459
1960 6040
|
Cessnock Ltd
Journal entries
scenario 4-Intangible Assets
Amount of development cost- 500000 + 380000= 880000
According to IAS 38 , both the cost of software development 380000 and cost of computer equipment are capitalised while the cost of computer equipment is recognized as an expense(Lim, Macias & Moeller 2018).
According to IAS 38 any operating cost or cost of hardware are capitalised.Also internally developed charge or expense relating to technological feasibility, probable future benefits and the ability to use and sell the software form a part of capitalised expenditure. Hence the above costs has been treated as capitalized(Saunders & Brynjolfsson,2016).
Lim, S. C., Macias, A. J., & Moeller, T. (2018). Intangible assets and capital structure.
Saunders, A., & Brynjolfsson, E. (2016). Valuing Information Technology Related Intangible Assets. Mis Quarterly, 40
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