Desco Ltd issued 100,000 ordinary shares of N1.00 each at N1.40 per share payable as follows:
(i) 35 kobo on application
(ii) 65 kobo on allotment (including premium)
(iii) 40 kobo on first call.
All the monies were received on due dates except for 10,000 shares not paid on first call. The holders of 10,000 shares failed to pay up and after some reminders, the shares were forfeited. The shares were re-issued at 75 kobo per share and all the monies were received.
Required:
(a) Prepare Journal entries to record the above transactions.
(b) State the purposes for which the share premium account may be applied.