Question

Section B - 9. On 1st June 2021, Iroko Plc issued 300,000 ordinary shares of D10 each, payable as follows: D6 on Application, D3 on Allotment, D1 on the First and Final Call. 450,000 applicants were received with application monies. The directors decided to: (i) reject 50,000 applications and return the monies received; (ii) issue the shares to the remaining applicants on the basis of three (3) shares for every four (4) shares applied; (iii) credit the excess application monies to allotment. All calls were made and monies received accordingly. Prepare the Share Application Account, Allotment Account, First and Final Call Account, Bank Account, and Ordinary Share Capital Account.

Accepted Answer

IN THE BOOKS OF IROKO PLC

(a) SHARE APPLICATION ACCOUNT
Dr: Bank account (application monies returned on rejected applications) 300,000; Allotment account (excess application monies transferred) 600,000; Ordinary share capital account (application monies applied to shares issued) 1,800,000. Total = 2,700,000.
Cr: Bank account (total application monies received, 450,000 applicants × D6) 2,700,000.

(b) ALLOTMENT ACCOUNT
Dr: Ordinary share capital account 900,000.
Cr: Application account (excess monies transferred) 600,000; Bank account (balance received on allotment) 300,000. Total = 900,000.

(c) FIRST AND FINAL CALL ACCOUNT
Dr: Ordinary share capital account 300,000.
Cr: Bank account 300,000.

(d) BANK ACCOUNT
Dr: Application (total monies received) 2,700,000; Allotment (balance received) 300,000; First and final call (monies received) 300,000. Total = 3,300,000.
Cr: Application (refund on rejected applications) 300,000; Balance c/d 3,000,000. Total = 3,300,000.

(e) ORDINARY SHARE CAPITAL ACCOUNT
Dr: Balance c/d 3,000,000.
Cr: Application account 1,800,000; Allotment account 900,000; First and final call account 300,000. Total = 3,000,000; Balance b/d 3,000,000 (300,000 shares × D10).

WAEC Accounting 2023 Theory — Question 21

Sign up free to unlock