Exercise 2.7 ★ ★ ★ SHARES, OPTIONS, DIVIDENDS AND RESERVE TRANSFERS The equity of Mondegreen Inc. at 30 June 2015 consisted of: 400 000 ordinary ‘A’ shares issued at $2.00, fully paid 300 000 ordinary ‘B’ shares issued at $2.00, called to $1.20 50 000 6% non-cumulative preference shares issued at $1.50, fully paid Share options issued at 60c, fully paid Retained earnings $800 000 360 000 75 000 24 000 318 000 The options were exercisable before 28 February 2016. Each option entitled the holder to acquire two ordinary ‘C’ shares at $1.80 per share, the amount payable on notifi cation to exercise the option. The following transactions occurred during the year ended 30 June 2016:

2015 Sept. 15 The preference dividend and the fi nal ordinary dividend of 16c per fully paid share, both declared on 30 June 2015, were paid. (Dividend is paid only with respect to capital paid.) The directors do not need any other party to authorise the payment of dividends. Nov. 1 A one-for-fi ve tradeable rights offer was made to ordinary ‘A’ shareholders at an issue price of $1.90 per share. The expiry date on the offer was 30 November 2015. The issue was underwritten at a commission of $3000. Nov. 30 Holders of 320 000 shares accepted the rights offer, paying the required price per share, with the renounced rights being taken up by the underwriter. Ordinary ‘A’ shares were duly issued. Dec. 10 Money due from the underwriter was received. 2016 Jan. 10 The directors transferred $35 000 from retained earnings to a general reserve. Feb. 28 As a result of options being exercised, 70 000 ordinary ‘C’ shares were issued. Unexercised options lapsed. April 30 The directors made a call on the ordinary ‘B’ shares for 80c per share. Call money was payable by 31 May. May 31 All call money was received except for that due on 15 000 shares. June 18 Shares on which the fi nal call was unpaid were transferred to treasury shares reserve. June 26 Treasury shares were reissued for $1.80 per share. The called balance of the 15 000 B shares was returned to the former shareholders, less the 20c shortfall per share. June 27 Refund paid to former holders of cancelled shares. June 30 The directors declared a 20c per share fi nal dividend to be paid on 15 September 2016.

Required

(a) Prepare general journal entries to record the above transactions.

(b) Prepare the equity section of the statement of fi nancial position as at 30 June 2016.