22. Radha Mohan Ltd. invited applications for issuing 4,00.000 equity shares of Rs. 50 each.
The amount was payable as follows:
On application Rs. 15 per share
On allotment
Rs. 25 per share
On first & final call Rs. 10 per share
Applications for 6,00,000 shares were received and pro rata allotment was made 16 all
the applicants on following basis:
Answers
Answer:
Explanation:
Please find the answer from the below attachment
Explanation:
Issue of Shares at Par
The company may issue shares at par i.e. at the face value. The company can demand the whole amount due on the shares in a lump sum or in installments.
Usually, the company calls for the application money and then it calls the balance amount at the time of allotment and calls. A company may open Share Application A/c and Share Allotment A/c separately or a single Share Application and Allotment A/c.
When a Public company invites the public to apply and subscribe to its shares, it needs to issue a Prospectus. Thus, a Prospectus is an advertisement by the company to apply for its shares. It has the share application form attached to it. Hence, when a company issues shares to the public, there are three possibilities:
Full Subscription: Full Subscription is when the number of shares company offers to the public and the number of shares for which it receives application is the same.
Under Subscription: Under Subscription is when the number of shares company offers to the public is more than the number of shares for which it receives the application. In this case, a company can make allotment only if it receives the Minimum Subscription. Minimum Subscription is 90% of the total shares that a company offers to the public. In case Company does not receive the amount of Minimum Subscription, it needs to refund the amount of application to the share applicants.
Over-Subscription: Over Subscription is when the number of shares company offers to the public is less than the number of shares for which it receives the application. In this case, the Company makes pro-rata allotment to the share applicants.
We will understand all these cases in detail in the solved example.
Journal entries for Issue of Shares at Par
Date Particulars Amount (Dr.) Amount (Cr.)
1. On receipt of Application money Bank A/c (actual amount received) Dr.
To Share Application A/c Cr.
(Being application money received on shares)
2. Transfer of application money to Share Capital A/c Share Application A/c Dr.
To Share Capital A/c Cr.
(Being share application money transferred to share capital)
3. On Share Allotment due Share Allotment A/c (amount due on allotment) Dr.
To Share Capital A/c Cr.
(Being share allotment due)
4. Share Allotment money received Bank A/c (actual amount received) Dr.
To Share Allotment A/c Cr.
(Being share allotment money received)
5. On Share call due Share Call A/c Dr.
To Share Capital A/c Cr.
(Being money on share call due)
6. Share call amount received Bank A/c Dr.
To Share Call A/c Cr.
(Being share call amount received)
Alternatively, a company may choose to prepare a combined Share Application and Allotment A/c. Thus, in such a case, we will replace the first four entries by the following entries. The rest of the entries will remain the same.
Date Particulars Amount (Dr.) Amount (Cr.)
1. On receipt of Application money Bank A/c (actual amount received) Dr.
To Share Application andAllotment A/c Cr.
(Being application money received on shares)
2. Transfer of application money and share allotment due Share Application and Allotment A/c (Total application and allotment amount) Dr.
To Share Capital A/c Cr.
(Being share application money transferred to share capital and allotment due)
3. Share Allotment money received Bank A/c (actual amount received) Dr.
To Share Application and Allotment A/c Cr.
(Being share allotment money received)
By this example you can solve your questions
#SPJ3