Financial Accounting
Sharonhy
Module2ii-OversubscriptionofsharesWorkedexample1.pptx
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1
Shareholders’ Equity
Podcast #2 - Oversubscription of Shares Worked Example
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2
Worked Example – Oversubscription of Shares
In July 2019, Mooloolaba Ltd calls for public subscriptions for 10 million shares.
The issue price per share is $1.20, to be paid in three parts, these being $0.50 on application, $0.40 within one month of the shares being allotted and $0.30 within two months of the first and final call, with the call for final payment being payable on 1 September 2019.
By the end of July, when applications close, applications have been received for 12 million shares; that is, two million in excess of the amount to be allotted.
Solution
Solution
1–31 July 2019
Dr Bank trust 6 000 000
Cr Application 6 000 000
Solution (continued)
We will assume that the excess funds are used to offset the amount due on allotment ($0.40 per share), and that all subscribers will receive an allotment of shares on a pro rata basis.
1 August 2019
Dr Application 5 000 000
Cr Share capital 5 000 000
(to allot the shares as partly paid to $0.50)
Dr Allotment 4 000 000
Dr Call 3 000 000
Cr Share capital 7 000 000
Dr Application 1 000 000
Cr Allotment 1 000 000
Dr Cash at bank 6 000 000
Cr Bank trust 6 000 000
Solution (continued)
30 August 2019
Dr Cash at bank 3 000 000
Cr Allotment 3 000 000
(to recognise the receipt of amounts due on allotment)
It is assumed that all amounts due on allotment are paid.
1 September 2019
Dr Cash at bank 3 000 000
Cr Call 3 000 000
NOTES:
Shares available for subscription10000000#
Share capital$12000000DateDrCrWorkings
1-31 JulBank trust 6000000
Price per share1.20Application 600000012m x $0.50
Application0.50
0.40Within one month1-AugApplication5000000
0.301-Sep-19Share capital500000010m x $0.50
Allotment400000010m x $0.40
Call300000010m shares x $0.30
Shares available for subscription10000000#Share capital7000000012m - 5m
Applications were received12000000
Oversubscription of number of shares2000000Application 1000000Balance = 0
Allotment1000000Balance = 3m
Oversubscription ($ value)1,000,000
Cash at bank 6000000
Bank trust6000000Balance = 0
30-AugCash at bank3000000
Allotment3000000Balance = 0
1-SepCash at bank3000000
Call3000000Balance = 0
AssetsLiabilitiesOwner's equity
Cash at bank = 12,000,000Share capital = 12,000,000
Account
