PACC6004 Semester 1, 2019

Practice Question #1 for Problem #1

Instructions for Problem Set Tests

1. To be completed in class. Any other method of submission is not acceptable.
2. This is a CLOSED BOOK test.
3. No books, notes or mobile devices are permitted.
4. Any non-programmable calculators are permitted.
5. This test is worth 10 marks.

Problem #1 in the test will have substantially the same structure and format as the Practice
Question. However, the numbers given in Problem #1 may not be exactly the same as those in
the Practice Question. Therefore, it is very important that you practice and understand how to
solve the question. Simply memorising the answer will not help.
The test will commence at the start of the class in Week 4 at 2.00 pm Friday 22 March 2019.
In the test, you will be given Problem #1 to complete your answer(s) IN CLASS. The duration
for the test is 30 minutes.
If you are late there will be no extra time concession given. Should you be late, you are advised
to sit down quietly and the test will be handed to you. PLEASE RESPECT YOUR FELLOW
CLASSMATES.
Should you miss this sitting, there will be no Supplementary test to replace this.

Student Name…………………………………………………………………

Student ID……………………………………………………………………..

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Note that the question has two parts that are related. You should complete Part 1 and
then proceed to Part 2.

Question (Part 1):

On 1 August 2016, NBS Ltd was incorporated and a prospectus was issued inviting applications
for 250 000 ordinary shares to the public at an issue price of $12, payable as follows:

$4 on application (due by closing date of 1 October)

$5 on allotment (due 1 November)
$3 on final call/calls (to be determined by the directors)

By 1 October, applications had been received for 350 000 ordinary shares of which applicants
for 50 000 shares forwarded the full $12 per share, applicants for 100 000 shares forwarded $9
per share and the remainder forwarded only the application money.

At a directors’ meeting on 7 October, it was decided to allot shares in full to applicants who
had paid the either $12 or $9 on application, to reject applications for 20 000 shares and to
proportionally allocate shares to all remaining applicants. According to the company’s
constitution, all surplus money from application can be transferred to Allotment and/or Call
accounts. All outstanding allotment money was received by the due date. Legal costs of
forming the company were $1300 and were paid on 11 October. Share issue costs of $10 000
were also paid on the same date.

Required
Prepare general journal entries to record the above transactions of NBS Ltd. Narrations
are not required. (4 marks)

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Question (Part 2):

At 30 June 2018, the equity of NBS Ltd consisted of the following:

50 000 preference shares issued at $10, paid to $5 250 000

250 000 ordinary shares issued at $12, paid to $9 2 250 000
Share issue costs (10 000)
Call in advance 150 000
Retained earnings (1 600 000)
Total equity $ 1 040 000

After a number of years of unprofitable trading, the company decided to undergo some
restructure to improve its financial position. The following transactions occurred in 2018-2019
financial year:

1) A final call for $3 was made on all ordinary shares on 1 July 2018 with money due by 31
July. All money was received by the due date except that the holders of 15 000 shares did not
pay.

2) On 10 August 2018, as provided by the company’s constitution, the directors forfeited the
15 000 shares on which calls were unpaid.

3) On 1 September 2018, the forfeited shares were reissued as fully paid for a consideration of
$10 per share. Costs of forfeiture and reissue amounted to 800. The constitution does not
provide for refund of any balance in the forfeited shares account after reissue to former
shareholders.

4) On 1 October, A call of $5 per share was made on the issued preference shares. All call
money was received by 31 October.

5) On 1 November 2018, a 1-for-10 rights issue was made to all existing ordinary shareholders
at an issue price of $10 per share. All rights were exercised by the expiry date 30 November.

6) On 1 December 2018, an offer was made to all existing ordinary shareholders to apply for
one $100 7% debenture for every 100 shares held. Applications and money were received from
holders of 100 000 share by 20 December.

7) On 28 June 2019, the directors determined that a final dividend of $125 000 from retained
earnings would be paid following the AGM.

Required:
1. Prepare general journal entries to record the above transactions of NBS Ltd.
Narrations are not required. (4.5 marks)

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Required:
2. Assuming that there were no other transactions, complete the equity section as at 30
June 2019 by filling in the blanks. (1.5 mark)

At 30 June 2019, the equity of NBS Ltd consisted of the following:

50 000 preference shares issued at $ 10, $ .

250 000 ordinary shares issued at $ 12, $ .
ordinary shares issued at $ , $ .
Share issue costs $ .
Call in advance $ .
Forfeited share reserve $ .
Retained earnings (1 600 000))

Total equity $ .

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