Possibilities after Issuing Shares: Oversubscription, Forfeiture, and Accounting Entries

The video tutorial covers the process of issuing shares, including the concepts of authorized, issued, and applied shares. It explains oversubscription and the options available to a company in such cases. The tutorial also details the necessary journal entries for share transactions, including applications, allotments, and calls. It discusses the forfeiture and reissue of shares, highlighting the accounting treatment of premiums and capital reserves. Finally, it demonstrates how to present these transactions in the balance sheet, ensuring that debits and credits are balanced.

What is the maximum number of shares Ria and Company can issue?

• 9,200 shares

• 12,000 shares

• 6,000 shares

• 10,000 shares

What does oversubscription of shares mean?

• The shares are issued at a premium

• The public applies for more shares than offered

• The company receives fewer applications than shares issued

• The company issues more shares than authorized

Which option is NOT available to a company during oversubscription?

• Reject applications and refund money

• Use a combination of rejection and pro-rata allotment

• Accept applications on a pro-rata basis

• Accept all applications without any adjustments

How many shares were fully allotted to shareholders in Lot A?

• 6,000 shares

• 5,000 shares

• 4,000 shares

• 2,000 shares

What is the rate used to adjust the balance in the share application account for Lot B?

• 20

• 25

• 15

• 10

What happens if a shareholder fails to pay the first call?

• The shares are issued at a premium

• The shareholder is given a discount

• The shares are forfeited

• The shares are automatically transferred

What is the face value of the shares issued by Ria and Company?

• 90

• 100

• 110

• 120

What is the premium rate at which the forfeited shares were reissued?

• 15%

• 20%

• 10%

• 5%

Where is the amount from forfeited shares transferred if there is no loss to adjust?

• Capital Reserve Account

• Share Capital Account

• Discount Account

• Bank Account

What should be ensured before moving to the next step in accounting?

• All shares are issued

• Debit and credit effects are equal

• All applications are accepted

• All shares are forfeited