West Ltd needs to raise funds for mining projects in Northern Territory. It currently has  share capital of $3 million and has issued 1.5 million shares. The directors have decided  to make a non-renounceable rights issue to existing shareholders of 300  000 new shares  at an issue price of $15 per share. Rainy Day Ltd, a firm of finance brokers has agreed to fully underwrite the rights issue.  West Ltd issued a prospectus on 1 April 2022 and applications closed on 3 May 2022.  Costs associated with the rights issue and the eventual issue of the shares were $30  000. Required 1. Prepare the journal entries for the rights issue and the subsequent share issue made  by West Ltd, assuming that 80% of the rights were exercised by the due date.  2. Prepare the journal entries assuming that the rights issue was not underwritten and  that any unexercised rights lapsed

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Rights issue
West Ltd needs to raise funds for mining projects in Northern Territory. It currently has 
share capital of $3 million and has issued 1.5 million shares. The directors have decided 
to make a non-renounceable rights issue to existing shareholders of 300  000 new shares 
at an issue price of $15 per share.
Rainy Day Ltd, a firm of finance brokers has agreed to fully underwrite the rights issue. 
West Ltd issued a prospectus on 1 April 2022 and applications closed on 3 May 2022. 
Costs associated with the rights issue and the eventual issue of the shares were $30  000.
Required
1. Prepare the journal entries for the rights issue and the subsequent share issue made 
by West Ltd, assuming that 80% of the rights were exercised by the due date. 
2. Prepare the journal entries assuming that the rights issue was not underwritten and 
that any unexercised rights lapsed

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