Journal Entries for Share Application and Allotment

This document provides the journal entries for share application and allotment in the books of Refresh Limited. It includes the date, particulars, and amounts for each entry.

Answer 1: One Beauty Limited
Profit and Loss Account for the year ended 30 June 2019
Particulars Note Amount
($)
Amount ($)
NET REVENUE 11,06,000
Cost of Sales(COS) 5,24,000
Gross Profit 5,82,000
OPERATING (EXPENSES) INCOME
Selling and distribution 1 2,25,200
Administrative 2 2,73,800
Other operating expenses (income), net 3 (30,000)
4,69,000
INCOME FROM OPERATIONS BEFORE FINANCIAL INCOME
(EXPENSES)
1,13,000
Financial income 4 8,000
Financial expenses 5 21,000
INCOME BEFORE INCOME TAX 1,00,000
Income tax 39,000
NET INCOME 61,000
STATEMENTS OF COMPREHENSIVE INCOME for the year ended 30 June 2019
NET INCOME 61,000
Other comprehensive income to be reclassified to profit or loss
in subsequent periods:
Gain on Foreign currency translation 18,000
Tax on Gain on Foreign currency translation (3,000)
Other Comprehensive Income 15,000
Total comprehensive Income 76,000

Notes:
1 Selling and distribution
Depreciation – motor vehicles 40,800
Doubtful debts expense 11,000
Rental expense 11,900
Salaries 93,500
Selling expense 68,000
2,25,200
2 Administrative
Amortization expense - patent 30,000
Depreciation – motor vehicles 27,200
Office expense 85,000
Rental expense 5,100
Salaries 93,500
Miscellaneous expense 28,000
Impairment loss – goodwill 5,000
2,73,800
3 Other operating (expenses) income, net
Gains from sales of motor vehicles 10,000
Proceeds from insurance claims 20,000
30,000
Working Notes:
A Working Allocation of
Common Expenses
Allocation Amount Allocation Basis
Particulars As per
Trial
Balance
Administrativ
e
Selling and
distributio
n
Administrativ
e
Selling and
distributio
n
Amortization expense -
patent
30,000 30,000 - 100% 0%
Depreciation – motor
vehicles
68,000 27,200 40,800 40% 60%
Doubtful debts
expense
11,000 - 11,000 0% 100%
Office expense 85,000 85,000 - 100% 0%
Rental expense 17,000 5,100 11,900 30% 70%
Salaries 1,87,000 93,500 93,500 50% 50%
Selling expense 68,000 - 68,000 0% 100%

Miscellaneous expense 28,000 28,000 - 100% 0%
B Patent (cost) 2,20,000
Accumulated
amortization – patent
20,000
Ammortisation in PL 18,000
Life assumed 147
Monthly
Ammortisation
1,500
Time elapsed (A) 13
Actual Life remaining
until 31 Dec 2025 from
30 June 2019 (B)
78
Total Life (A+B) 91
Ammortisation till date 32,117
Round off 32,000
Already Amortised 2,000
Amortisation in current
year PL
30,000

One Beauty Ltd
Statement of change in Equity as of 30 Jun2019
Particulars Equity Share
Capital
Retained
Earnings
Currency Translation
reserve
Opening Balance as on 01 July
2018
4,00,000 52,000 10,000
Interim Dividend Paid - (16,000) -
Profit for the year - 61,000 -
Foreign currency Translation
Gain
- - 15,000
Closing balance as on 30 June
2019
4,00,000 97,000 25,000
Working Notes:
A Retained earnings at 16
December 2018
36,000
Add: Interim Dividend Paid 16,000
Retained earnings at 01 July
2018
52,000
One Beauty Ltd
Statement of Financial Position as on 30 June 2019
ASSETS Note Amount ($)
Non-current Assets
Property, Plant & Equipment 6 2,69,000
Intangible Assets 7 2,63,000
Deferred tax assets 18,000
Current Assets
Cash & Cash Equivalent 8 1,34,000
Inventories 92,000
Accounts receivable (Net) 9 1,07,000
Total Assets 8,83,000
EQUITY AND LIABILITIES
EQUITY
Equity Capital 4,00,000
Retained Earnings 97,000

Other Reserves 25,000
Total Equity 5,22,000
LIABILITIES
Non-current liabilities
Bank loan 1,75,000
Deferred tax liabilities 22,000
Current liabilities
Accounts payable 1,14,000
Current tax liabilities 37,000
Bank overdraft 13,000
Total Liabilities 3,61,000
Total Equity and Liabilities 8,83,000
Notes:
6 Property, Plant & Equipment
Motor vehicles 4,72,000
Accumulated depreciation – motor vehicles (2,03,000) 2,69,000
7 Intangible Assets
Patent (cost) 2,20,000
Accumulated amortization – patent (32,000)
Goodwill 1,00,000
Accumulated impairment losses – goodwill (25,000) 2,63,000
8 Cash & Cash Equivalent
Cash on hand 4,000
Bank deposits 1,30,000 1,34,000
9 Accounts receivable (Net)
Accounts receivable 1,18,000
Allowance for doubtful debts (11,000) 1,07,000
Answer 2:.
PART 1:

During September 2018, a client filed a lawsuit against Forever Young Ltd, having suffered severe
skin damage after consuming the company’s products. This was reported as a contingent liability in
its financial statements during the year ending 30 June 2019 but the same was not heard till the second
week of July 2019.After that the judge handed down the decision against the entity and the company
liable to pay damages and costs totalling $5,00,000.The event described occurred after the end of the
reporting period and would fall under the category of adjusting event as the said event situation
existed on the balance sheet date .As the event occurred after the balance sheet date but the situation
had an existence on the balance sheet date itself.
The contingent liability recorded in the books of accounts will result in the actual flow of cash of the
organization. The journal entry required to be passed for the above scenario:
No journal entry
(Being no journal entry when the entity records the contingent liability)
Profit and loss Account $5,00,000
To lawsuit for damages Account $5,00,000
(Being lawsuit filed by customer against the company for having suffered severe skin damages)
As the above entry is required to be passed in the company books of Accounts as according to the
Accounting Standard Board (AASB) all the events which occur after the balance sheet date but has an
existence on the balance sheet date is required to be adjusted and form part of the books of accounts
on the same financial year and shall have prospective effect to it.
PART 2:
As the company had acquired a plant in the year 2013 and the plant was depreciated on the basis of
straight-line method. The entity estimated its useful life to be 15 years with its residual value as zero.
In the year 2019 the expert advised the company that the plant had an expected useful life of 20 years
but no change in the residual value.
On the basis of above analysis, it is a change in an accounting estimate by the management of the
entity following the advice of expert. The entry recorded in the books of Accounts of company till
date:
Depreciation Account ……. Dr 2,00,000
To Accumulated Depreciation Account. 2,00,000
(Being depreciation recorded)
The event described occurred after the end of the reporting period and would fall under the category
of adjusting event as the said event situation existed on the balance sheet date. As the event occurred
after the balance sheet date but the situation had an existence on the balance sheet date itself. The
above said event qualifies for adjustment and the following journal entry is required to be passed in
the books of Accounts of the firm:
Accumulated Depreciation Account ……Dr 66,667

To Depreciation Account 66,667
(Being excess depreciation, which has been recorded in the books is reversed)
As the above entry is required to be passed in the company books of Accounts as according to the
Accounting Standard Board (AASB) all the events which occur after the balance sheet date but has an
existence on the balance sheet date is required to be adjusted and form part of the books of accounts
on the same financial year and shall have prospective effect to it.
PART 3:
This is a situation in which it is realised upon checking the assets register that something is missed.
As the entity has acquired a new vehicle on 1st January 2018 for $80,000 and the accountant of the
company charged the same to cost to the vehicle maintenance expenses account for the year ended
30th June 2018.The directors also have decided to depreciate all the expenses at 20% per annum.
On the basis of the above analysis there is a prior period error made by the accountant while recording
in the books of accounts and treated in the books of accounts as expenses and deducted from the
respective profit of the entity. The following journal entry is passed in the books of Accounts of the
firm:
Repairs to Vehicle Expenses Account ……Dr 80,0000
To Bank Account 80,0000
(Being vehicle expenses incurred)
Profit and Loss Account ……. Dr
To Repairs to vehicle Expenses Account
(Being Repairs transferred to Profit and Loss Account)
The following rectification journal entry is required to be passed in the books of Accounts of the
firm:
In the year 2018
Asset Account ………. Dr $80,000
To Repairs Account $80,000
(Being Assets debited and Repairs credited for the same)
Depreciation Account…………. Dr $8,000
To Accumulated Depreciation Account $8,000
(80000*20%/2)

(Being depreciation charged for the asset added newly)
Profit and Loss Account. …………Dr $8,000
To Depreciation Account. $8,000
(Being depreciation during the year charged to profit and loss Account)
Repairs V………………………. Dr $80,000
To Profit and Loss Account $80,000
(Being the entry wrongly debited now credited and reversal done)
In the year 2019
Depreciation Account……………………...Dr $16,000
To Accumulated Depreciation Account $16,000
(80000*20%)
(Being Depreciation charged to Accumulated depreciation)
Profit and Loss Account…………… Dr $16,000
To Depreciation Account. $16,000
(Being depreciation charged to profit and loss Account)
On the basis of above analysis there is a retrospective amendment to be made in the books of the
company.
PART 4:
The entity Forever young limited has a major client My Beauty Ltd with a receivable overdue
amounts to $75,000.As heard about the financial instability of the Beauty limited the entity Forever
young limited decided to have allowed a provision for doubtful debt of $25,000 for the particular
client in his books of accounts for the year ended 30th June 2019.For the company the liquidator was
appointed and was informed that no amount can be recovered as the entity is fully bankrupt in respect
of the amount dues.
According to the above analysis the event described occurred after the end of the reporting period and
would fall under the category of adjusting event as the said event situation existed on the balance
sheet date. As the event occurred after the balance sheet date but the situation had an existence on the
balance sheet date itself. The journal entry to be passed in the books of accounts:

Provision for Doubtful Debt Account ……Dr25,000
To Profit and Loss Account 25,000
(Being Provision recorded)
The adjustment entries to be passed in the books of accounts of the entity are here in below:
Bad debt Account …... Dr $75,000
To Accounts Receivable Account $75,000
(Being the party became insolvent) t
And
Profit and Loss Account……. Dr $75,000
Too Bad debt Account $75,000
(Being bad debt entry passed to profit and loss account)
And
Profit and Loss Account, Dr $25,000
To Provision for Doubtful debts Account $25,000
(Being provision entry passed through profit and loss Account)

Answer 3:
In the books of Refresh Limited
Journal Entries
$ $
Date Particulars Dr Cr
31-07-2018 Bank A/c..Dr 15000000
To Share Application A/c 15000000
(Being application money received)
10-08-2018 Share Application A/c..Dr 15000000
To Share Capital A/c 12500000
To Share Allotment A/c 2500000
(Being Share prorata isued)
12-08-2018 Underwriting Commission A/c..Dr 17000
To Bank A/c 17000
(Being underwriting Commission
Paid)
10-09-2018 Bank A/c..Dr 2500000
To Share Allotment A/c 2500000
(Being allotment money received)
10-09-2018 Share Allotment A/c..Dr 2500000
To Share Capital A/c 2500000
(Being share alloted)
01-02-2019 Bank A/c..Dr 2490000
To Share call A/c 2490000
(Being call money received)
01-02-2019 Share Call A/c..Dr 2490000
To Share Capital A/c 2490000
(Being share fully paid up)
20-03-2019 Share Capital A/c 70000

To Share Forfeiture A/c 70000
(Being Share forfeited)
05-04-2019 Bank A/c..Dr 68000
Share Forfeiture A/c 12000
To Share Capital A/c 80000
(Being Forfeited shares issued)
05-04-2019 Share reissue Cost A/c..dr 5000
To Bank A/c..Dr 5000
(Being cost incurred for share
reissue)
12-04-2019 Share Forfeiture A/c...Dr 58000
To Share reissue cost A/c. 5000
To Bank A/c 53000
(Being Balance paid to defaulters)
Answer 4:
In the books of Nutrifresh Limited
Journal Entries
$ $
Date Particulars Dr Cr
01-07-2017 Plant A/c (A)…..Dr 800000
Plant A/c (B)…..Dr 600000
To Bank A/c 1400000
(being Machine installed)
30-06-2018 Depreciation A/c..Dr 192000
To Accumulated Depreciation A/c 192000
(Being Depreciation Charged)
Plant A
Value of Asset= 800000
Salvage Value= 80000
Life= 10 years
Depreciation = (Value- Salvage)/Life
72000
Plant B
Value of Asset= 600000
Salvage Value= 0
Life= 5 years
Depreciation = (Value- Salvage)/Life

120000
30-06-2018 Profit and Loss A/c 192000
To Depreciation A/c 192000
(being Depreciation transferred)
30-06-2018 Accumulated Depreciation A/c..Dr 32000
To Revaluation Reserve A/c 32000
(For Plant A)
30-06-2018 Revaluation Reserve A/c..Dr 32000
Profit and Loss A/c..Dr 48000
To Plant B A/c 80000
(Being Asset Recognised at Fair Value)
(480000-400000)
30-06-2019 Depreciation A/c..Dr 185000
To Accumulated Depreciation A/c 185000
(Being Depreciation Charged)
Plant A
Value of Asset= 760000
Salvage Value= 80000
Life= 8 years
Depreciation = (Value- Salvage)/Life
85000
Plant B
Value of Asset= 400000
Salvage Value= 0
Life= 4 years
Depreciation = (Value- Salvage)/Life
100000
30-06-2019 Profit and Loss A/c 185000
To Depreciation A/c 185000
(being Depreciation transferred)
30-06-2018 Accumulated Depreciation A/c..Dr 20000
To Revaluation Reserve A/c 20000
(For Plant B)
(3000000-3200000)
30-06-2018 Revaluation Reserve A/c..Dr 75000
Profit and Loss A/c..Dr 75000
To Plant B A/c

(Being Asset Recognised at Fair Value)
(760000-85000-60000)
Note: Considering a single Revaluation Reserve and no product specific
reserves.