Question

Equity transactions and adjustments, statement of changes in equity.

On 30 June 2013, the equity of Lilium Ltd consisted of:

25000 ordinary shares issued at $3, called to $2.50               $62 500

1500 ordinary shares, issued at $1.50, fully paid                     $2 250

Calls in arrears (1000 shares at 50c)                                        $(500)

General reserve                                                                         $12 500

Retained earnings                                                                      $ 39 500

Total Equity                                                                                 $ 116 250

The company has recognized a liability of $10 000 in relation to 5000 8% redeemable preference shares, issued at $2 each and fully paid. These preference shares must be redeemed at 5% premium by 31 March 2014.

During the year ended 30 June 2014, the following events occurred.

1. By 31 July 2013 $300 of outstanding call money had been received.

2. On 7 August 2013 the directors forfeited those ordinary shares with calls outstanding. The company's constitution provides that no refund is made to the former shareholder.

Required:

Prepare general journal entries to record the above events.