Here's how you can journalize the application and allotment of the preference shares and ordinary shares for Kagiso Ltd for the year ending 29 February 2024.
(a) Journal Entries for Preference Shares
Calculations:
- Total Preference Shares Issued: 200,000 shares
- Issue Price per Share: R25
- Total Amount Received: 200,000 shares * R25 = R5,000,000
- Applications Received: 250,000 shares * R25 = R6,250,000
- Excess Application Money Refunded: (250,000 - 200,000) shares * R25 = R1,250,000
Journal Entries:
-
To record the applications received:
- Debit Bank (Applications Received) R6,250,000
- Credit Share Application (Preference Shares) R6,250,000
-
To record the allotment of preference shares:
- Debit Share Application (Preference Shares) R5,000,000
- Credit Preference Share Capital R5,000,000
-
To refund excess application money:
- Debit Share Application (Preference Shares) R1,250,000
- Credit Bank (Refunded) R1,250,000
Affected Components:
- Statement of Financial Position (SFP) for Bank and Share Capital (preference shares).
- Statement of Changes in Equity (SCE) reflecting changes in Share Capital.
(b) Journal Entries for Ordinary Shares
Calculations:
- Total Ordinary Shares Issued: 400,000 shares (350,000 from applications, 50,000 from underwriting)
- Issue Price per Share: R15
- Total Amount Received from Applications: 350,000 shares * R15 = R5,250,000
- Total Amount Received from Underwriting: 50,000 shares * R15 = R750,000
Journal Entries:
-
To record applications received:
- Debit Bank (Applications Received) R5,250,000
- Credit Share Application (Ordinary Shares) R5,250,000
-
To record the underwriter's take-up of unsubscribed shares:
- Debit Bank (Underwriter Take-up) R750,000
- Credit Share Capital (Ordinary Shares) R750,000
-
To record the allotment of ordinary shares:
- Debit Share Application (Ordinary Shares) R6,000,000
- Credit Ordinary Share Capital R6,000,000
Affected Components:
- Statement of Financial Position (SFP) for Bank and Share Capital (ordinary shares).
- Statement of Changes in Equity (SCE) reflecting changes in Share Capital.
Note: The total shares at allotment are calculated as:
- Total Ordinary Shares Issued = Applications + Underwriter Take-up = 350,000 + 50,000 = 400,000 shares.
This results in a combined total amount received from ordinary share applications and underwriting, which is properly allocated to the share capital accounts in the journal entries.
Make sure to adjust amounts as necessary based on actual figures if they differ from assumptions.