Question

Byron required additional equity funding and decided to issue a renounceable rights offer. To reduce risks associated with the rights issue, Byron Ltd appointed an underwriter.

Byron Ltd sent out details of the rights issue to existing shareholders on 1 July 2015 and offered existing shareholders the right to acquire an additional share in Byron Ltd for $3.00 per share. The shares were to be fully paid on application and all applications had to be received by 10 September 2015. The total shares on offer through the rights issues were 15 million.

By 10 September 2015 applications had been received for 13 million shares meaning that the underwriter was responsible for acquiring the remaining two million shares. The shares were issued on 17 September 2015 with this also being the date on which amounts due from the underwriter were received.

Provide the journal entries to account for the Byron Ltd rights issue.