Topic: Financing Company Operations
Mindgym Ltd had IPO on 1 November 2014 and offered 500 000 ordinary shares to the public at an issue price of $5 per share. The issue price was payable on the following dates.
- 15 November: $2 on application
- 15 December: $2 on allotment
- 15 January: $1 on final call
Applications were received for 600 000 shares by 15 November, of which the full issue price of $5 was paid for by 100 000 prospective investors.
On 16 November, the surplus application money, i.e. $2 per share, was returned to 100 000 unsuccessful applicants who only paid the application money as stated in the company's constitution. Shares were allotted in full to those applicants who paid the full amount and on a usual basis to the other applicants. The underwriting fee and other share issue costs of $8 000 were paid on 30 November. All outstanding allotment money was received by the due date.
On 1 January, the final call was made payable on 15 January. All money was received by the due date except for 20 000 applicants who fail to pay. The Directors decided to forfeit these shares on 22 January with the balance of Forfeited Share Liability account being returned to the original applications on 22 January.
Required:
a) Prepare the journal entries to record the above transactions of Mindgym Ltd.
b) Prepare the equity section of Mindgym statement of financial position once the above transactions have been recorded.