Submitted by: Submitted by rhysbosing
Views: 34
Words: 304
Pages: 2
Category: Business and Industry
Date Submitted: 02/28/2015 06:59 AM
DELINQUENT SUBSCRIPTIONS
•
• 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 offered for sale in a public auction.
• The offer price of the delinquent shares includes the following:
ü Balance due on the subscription
ü Interest accrued on the subscription due
ü Expenses of advertising and other costs of sale
• The sale of the delinquent subscription is issued to the highest bidder.
• 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.
• Once the subscription is fully paid, all subscribed shares are issued. Shares are first given to the highest bidder. The excess shares are given to the defaulting subscriber.
• If there is no bidder, all of the delinquent shares will be issued in the name of the corporation. Such shares are considered treasury shares. The defaulting subscriber does not get any share.
PROFORMA JOURNAL ENTRIES:
1. Subscription of 1,000 ordinary shares at P10 par value.
Subscription receivable –Ordinary 10,000
Subscribed share capital-Ordinary 10,000
2. 20% collection
Cash 2,000
Subscription receivable-Ordinary 2,000
3. The subscriber defaulted. The subscription was declared delinquent.
NO JOURNAL ENTRY
4. Advertised the delinquent share for public auction - P1,000
Receivable from Highest Bidder 1,000
CASH 1,000
5. The...