CORPORATION ACCOUNTING

Delinquent Subscription
When a subscriber fails to pay his subscription on the call date, the
corporation sends several notices to remind him of his obligation. If
these notices are ignored by the subscriber, his subscription is
declared delinquent. The delinquent subscription is ofered for sale in
a public auction.
1. The sale of the delinquent subscription is issued to the highest
bidder.
2. The highest bidder is the one who is willing to pay the unpaid
balance of the subscription plus accrued interest plus all
expenses related to the sale and is willing to receive the
smallest number of shares.
3. Once the subscription is fully paid, all subscribed shares are
issued. hares are !rst given to the highest bidder. The excess
shares are given to the defaulting subscriber.
4. If there is no bidder, all of the delinquent shares will be issued in
the name of the corporation. uch shares are considered
treasury shares. The defaulting subscriber does not get any
share of stoc".
Pro-forma Entries S!ort "et!o#
ubscription ubscriptions receivable xxx
ubscribed share capital xxx
#artial collection $ash xxx
ubscriptions receivable xxx
ubscriber defaults %o entry
and corporation
declares the
subscription
as delinquent
$osts incurred &eceivable from highest bidder xxx
in connection $ash xxx
with delinquency
1
sale
'ighest bidder $ash xxx
pays &eceivable from highest bidder xxx
ubscriptions receivable xxx
toc" certi!cates ubscribed share capital xxx
are issued hare capital xxx
OR
If there is no Treasury shares xxx
bidder &eceivable from highest bidder xxx
ubscriptions receivable xxx
ubscribed share capital xxx
hare capital xxx
Classroom E$ercise
(ournali)e the following transactions*
1. +r. , subscribed -,... shares of / $orporation common shares
with a par value of #-..
2. +r. , paid #0,... cash as partial payment.
3. The corporation declared the above subscription as delinquent.
4. Incurred advertising costs of #1...
5. 2idders in the public auction were as follows*
+r. & 3 45. shares
+r. 3 455 shares
+r. T 3 445 shares
The highest bidder paid the balance of the subscription plus
advertising costs.
6. toc" certi!cates were issued.
(uly 6.-4
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