Issue of Shares Practical Problems and Solutions

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on November 16, 2021

Question 1: Issue of Shares at Par – Journal

Shipping Limited issued 10,000 equity shares of $25 each, payable $5 on application, $10 on allotment, and $10 on first and final call. All the shares are subscribed and the amount duly received. Pass the journal entries.

Solution

Journal Entries

Shipping Limited Journal Entries

Question 2: Issue of Shares at Par – Journal and Cash Book

M Limited issued 10,000 equity shares of $10 each payable as to:

  • $2 per share on application
  • $5 per share on allotment
  • $3 per share on first and final call

All money was duly received. Show the necessary journal and cash book entries to record the above transactions.

Solution

Journal Entries

M Limited Journal Entries

Cash Book

M Limited Cash Book
Note: In actual practice, cash transactions are not jounalized but are passed through a cash book (bank column). Journal entries are passed only in respect of other transactions. It is also common practice to pass separate entries for equity shares and preference shares.

Question 3: Issue of Shares at Par – Journal, Cash Book, and Balance Sheet

A limited company issued 25,000 ordinary shares of $25 each, payable $5 on application, $10 on allotment, and $5 each on subsequent calls. 20,000 shares were fully subscribed and money dully received.

You are required to prepare journal entries, a cash book, and a balance sheet for the company.

Solution

Journal Entries

Limited Company Journal Entries
Limited Company Accounts
Limited Company Balance Sheet

Question 4: Issue of Two Classes of Shares at Par

A company was registered with an authorized capital share of $2,500,000 divided into 10,000 preference shares of $100 each and 15,000 equity shares of $100 each.

Out of these, 4,000 preference shares and 8,500 equity shares were issued. These shares were payable as under:

Preference Shares Equity Shares
On Application 20 20
On Allotment 30 40
On First Call 50 40

All shares were paid in full. You are required to prepare the necessary journal entries, a cash book, and a balance sheet.

Solution

Journal Entries

Issue-of-two-classes-of-shares-at-par
Cash-book-for-two-classes-of-shares
balance-sheet-of-two-classes-of-shares

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True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

2 thoughts on “Issue of Shares Practical Problems and Solutions”

  1. good work .
    How about when ,for instance , there was oversubscription of 20,000shares of which 10,000 was rejected and the balance balance was alloted on pro-rata basis and the excess application dealt with in allotment .how could we about that

    Reply
  2. CAN YOU PLEASE PROVIDE SUMS ON FORFEITURE AND REISSUE OF SHARES AS WELL ?? INCLUDING PRORATA ALLOTMENT ?? SINCE ALL SUMS , HERE MENTIONED , ALL SHARES ARE DUELY RECEIVED . NO ARREARS , NO FORFEITURE , NO REISSUE . SO PLEASE PROVIDE SUMS COVERING THESE SCENARIOS AS WELL .

    Reply

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