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A company offered 6000 shares at $90 per share. And received 9200 applications. The company rejected and refund 200 application and allotted the remaining on pro-rata basis
Application cost = 10
Allotment = 20
First call = 30
Final call – 30
Journal entry:
1. Dr Bank 92000, Cr Application 92000
2. Dr Application 2000, Cr Bank 2000
3. Dr Application 90000, Cr Original share 60000, Cr Allotment 30000
4. Dr Bank 90000, Cr Allotment 90000
5. Dr Allotment 120000, Cr Original shares 120000
6. Dr Bank 180000, Cr first call 180000
7. Dr first call 180000, Original shares 180000
8. Dr Bank 180000, Cr first call 180000
9. Dr first call 180000, Original shares 180000
Every account is closed except, Ordinary share 540,000 and Bank 540,000This is a shortened question and answer i found on internet, so is the journal entry correct?
If so, i dont quite understand “Number 4”, where did the Dr Bank 90000, Cr Allotment 90000 come from?
Also, i dont quite understand pro-rata basis, like how do we use it? What does it do?
This is not examinable in Paper FA, and had not been examinable for many years!!!
You should not be using questions you find on the internet for practice. You need to buy a Revision Kit from one of the ACCA Approved Publishers. It is full of exam standard questions (for the current syllabus) and practice is essential to passing the exam.
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