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ACFI2012 Accounting For Corporate Entities

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Patterson Ltd was registered on 18 March 2017, as a company with a constitution limiting the shares that could be offered to; 4 000 000 Ordinary A shares and 2 000 000 non-voting Ordinary B shares. The company issued a prospectus dated 12 May inviting the public to apply for 3 000 000 Ordinary A class shares at $2.50 per share. The terms of the shares on issue are $1.00 on application, $1.00 on allotment and $0.50 to be called within six months of allotment.

If the issue is oversubscribed the directors will make a pro-rata issue of shares and the excess application money will be applied to allotment and calls before any refunds will be given.On 15 May the directors also decided to issue 1 000 000 non voting Ordinary B shares as fully paid to the promoters for a payment of $2.00 per share.

On 30 June applications closed. Applications for 4 500 000 shares in total had been received with applicants for 1 500 000 shares paying $2.50 and the remainder paying only the application fee.

On 4 July the shares were allotted, with all allotment money owed, paid by the 30 July.

On 22 July share issue costs of $35,000 for the Ordinary A shares. The share issue costs related to legal expenses associated with the share issue and fees associated with the drafting and advertising of the prospectus and share issue.

The call on the Ordinary A shares was made on 25 August and due by 30 September. All call money was received except for the call on 20 000 shares. The directors met and forfeited the shares on 8 October. On 23 October the $2.50 shares were reissued at $2.20 fully paid to $2.50. Costs associated with reissuing the forfeited shares totalled $8,000. The money was refunded to the defaulting shareholders on 10 November.

The directors announced on 23 November that they were to make a further issue of 1 000 000 Ordinary A shares in 8 months time for $4.00 per share. They issued a call option on these shares, with $0.60 payable by 15 December. All options were sold.


  • Prepare a schedule for the Ordinary A share issue that shows the break-up of:
  • number of shares applied for;
  • number of shares allotted;
  • total cash received;
  • cash received that relates to application;
  • cash received that relates to allotment;
  • cash received that relates to calls (in advance); and
  • cash refunded. 
  • Prepare journal entries for the above transactions. Note: the entries should be in strict date order of the underlying event. (Narrations required) 

Question 2 

Banjo Ltd began operations on 1 July 2016. Items in the statement of financial position as at 30 June 2018 are:

Year end balances


Inventory on hand


Accounts receivable


Allowance for Impairment


Goodwill (net)


Provision for Employee Entitlements


Accounts payable


Cash at Bank


Vehicles at cost


Vehicles: Accumulated Depreciation


Equipment at cost


Equipment: Accumulated Depreciation


Computers at cost


Computers: Accumulated Depreciation


Rent Payable


Prepaid Insurance


Deferred Tax Liability (before adjustment)


The depreciation regimes for the financial reports and the company income tax return respectively, are listed below. The company income tax rate is 30%.

Depreciation Regimes




Depreciation rate:





















Reducing Balance

Reducing Balance

Reducing Balance





During the year the company recognised the following transactions which are treated differently for tax and accounting purposes:

  • Insurance of $78,000 was paid during the year. Of this amount, $40,500 is prepaid for next year.
  • Rent of $4,000 is owing at the end of the year, $48,000 has paid in cash during the year.
  • Employee Entitlements (Annual, Sick and Long Service Leave) totalling $10,000 were expensed during the year. Payments of $4,000 were made.
  • Bad Debts expense was $9,000 for the year.
  • Goodwill was impaired by $12,000 during the year.

Items in the income statement which were treated the same for accounting and tax purposes were:

  • Sales $1,180,000
  • Cost of Goods Sold $615,500
  • Salaries and Wages $89,000
  • Other expenses $21,400
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