Technology company DDD Ltd announced plans to raise $3 million through a placement of 11.

5 million shares in order to proceed with its business plans in the next year. The placement was at an 8.3% discount to the most recent trading price on the securities exchange. Another company which owned 8.7 million shares in DDD wanted to sell its shares, and it was agreed that another major shareholder would acquire 2.3 million of these shares, and that a director would acquire another 1.8 million of the shares. The remainder would be sold to the public. DDDs chairman was satisfied with the interest that investors had shown in participating in the placement, particularly given the recent history of losses made by the company.

The money received must be kept in a separate bank account until the company has allotted shares to applicants or returned the money to the applicants (s. 722). This bank account is kept by the corporation in trust solely for the purpose of depositing application money paid in by the applicants

Cash Trust Dr 3 000 000 Application Cr 3 000 000 (Money received on application)

Once the minimum number of shares or the minimum subscription (if any) has been received, the directors will allot the shares to applicants as they see fit. The appropriate journal entry to reflect acceptance of the applicants offers is: Application Dr 3 000 000 Share Capital Cr 3 000 000 (Issue of 11 500 000 shares fully paid to applicants)

Amount of money paid in by successful applicants is transferred from the Cash Trust account to the companys general cash. Cash Dr 3 000 000 Cash Trust 3 000 000

No adjustments required for private placement because the transaction only involve the transfer of shares.