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On 1 January 2017, Elm Ltd issued a prospectus inviting applications for 300,000 ordinary shares,...

Question:

On 1 January 2017, Elm Ltd issued a prospectus inviting applications for 300,000 ordinary shares, at an issue price of $6, payable $4 on application, $2 on allotment. By 30 April, applications were received for 290,000 shares with $4 paid. As the minimum required subscription had been reached, on 1 May the directors allotted 290,000 shares. Share issue costs of $1,200 were also paid on the same date. All of the allotment money was received by 1 June. Required: Prepare journal entries to record the above transactions.

Private Placement:

Private placement is a process of offering of a company shares to only few selected investors. In the private placement the shares are not offered to the common people. Investors in the private placement includes HNIs, other companies, mutual funds, etc.

Answer and Explanation:

Journal Entries

DateParticular'sDebitCredit
On Receipt of Application Money
30-Apr.-17Bank Account$1,160,000.00
To Share Application Received ...

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