- 20 Marks
Question
a. The information below shows the analysis of costs of a newly purchased equipment by JONAK Nig. Ltd.
| Description | N |
|---|---|
| Cost of equipment | 3,000,000 |
| 2% cash discount for payment within 30 days (enjoyed) | 60,000 |
| Transport cost | 100,000 |
| Hospitality cost for factory workers during installation | 25,000 |
| Installation cost | 150,000 |
| Repair cost prior to use | 65,000 |
| Salaries of operators | 125,000 |
Determine the total acquisition cost of the equipment. (5 Marks)
b. MEMORY Nigeria Limited decided to issue 100,000,000 N1 ordinary shares. The terms of issue are stated below:
- (i) 30k on application
- (ii) 45k (including premium) on allotment
- (iii) 20k to be called one month after allotment
- (iv) 25k final call made four months later after allotment.
On December 29, applications were received for 120,000,000 shares. On January 1, the shares were allotted so that every applicant received two-thirds of the number of shares applied for. Excess application monies were held against the amount due on allotment. On January 4, the cash due on allotment was received. On February 1, the first call was made and on February 3, cash was received. On May 1, the second call was made and cash was received on May 3.
Required: b. Raise the necessary Journals to record these transactions. (11 Marks) c. State the difference between authorised share capital and called-up share capital (4 Marks)
(Total 20 Marks)
Answer
a. Total Acquisition Cost
| Item | N |
|---|---|
| Cost of equipment | 3,000,000 |
| Transport cost | 100,000 |
| Installation cost | 150,000 |
| Hospitality cost during installation | 25,000 |
| Repair cost prior to use | 65,000 |
| Total Acquisition Cost | 3,340,000 |
b. Journal Entries
| Date | Particulars | Debit (N’000) | Credit (N’000) |
|---|---|---|---|
| Dec 29 | Bank Account | 36,000 | |
| Application | 36,000 | ||
| (Amount received on application for 120m shares) | |||
| Jan 1 | Allotment Account | 36,000 | |
| Ordinary Shares | 20,000 | ||
| Share Premium | 16,000 | ||
| (Allotment of 80m shares recognized) | |||
| Jan 4 | Bank | 24,000 | |
| Application | 12,000 | ||
| Allotment | 24,000 | ||
| (Amount received on allotment) | |||
| Feb 1 | First Call Account | 16,000 | |
| Ordinary Shares | 16,000 | ||
| (First call due on 80m shares) | |||
| Feb 3 | Bank | 16,000 | |
| First Call Account | 16,000 | ||
| (Amount received on first call) | |||
| May 1 | Final Call Account | 20,000 | |
| Ordinary Share Capital | 20,000 | ||
| (Final call due on 80m shares) | |||
| May 3 | Bank | 20,000 | |
| Final Call Account | 20,000 | ||
| (Amount received on final call) |
c. Difference between Authorised Share Capital and Called-Up Share Capital
- Authorised Share Capital: The maximum number of shares a company can issue, as specified in its Memorandum of Association.
- Called-Up Share Capital: The portion of authorised capital for which the company has requested payment from shareholders.
- Tags: Acquisition, Equipment Cost, Journal Entries, Share Capital
- Level: Level 1
- Topic: Financial Statements Preparation
- Series: NOV 2015
- Uploader: Dotse