22. X Co. Ltd. invited applications for 20,000 of its Equity Shares of * 10 each at a premium of 7 2
per share, payable 3 on application, * 7 on allotment including premium and the balance on
first and final call.
Applications for 25,000 shares were received. It was decided : (a) to refuse allotment to the
applicants for 1,000 shares ; (b) to allot in full to applicants for 4,000 shares ; (c) to allot the
balance of the available shares pro-rata among the other applicants, and (d) to utilise excess
application moneys in part payment of allotment moneys.
Mr. X holding 200 shares to whom shares had been allotted on pro-rata basis failed to pay
the amount due on allotment and call and Mr. Y holding 100 shares to whom full allotment was
made failed to pay the amount due on call only. These shares were forfeited.
160 forfeited shares of Mr. X and 40 forfeited shares of Mr. Y were reissued at a discount of
* 1 per share to Mr. Z.
Show the necessary Journal Entries including cash in the books of X Co. Ltd.
Ans. R 720 transferred to Capital
Answers
Answer:
(Both Classes of Shares/Cash Book) Y Ltd. was formed with an authorised capital
* 40,00.000 divided into 3,00,000 equity shares of 10 each and 10,000 Preference shares
* 100 each. Both classes of shares were issued to the public in full and they are to be pa
Preference shar
follows:
Equity shares
Application
20 percent
Allotment
30 percent
First call
50 percent
Second call
All the calls were made and in due course the money were received in full. Give
necessary journal entries and prepare Cash Book.
25 perc
25 perc
25 perc
25 perc
Amount transferred to Capital A/c is Rs. 720
Explanation: JOURNAL ENTRIES
Bank A/c (25,000*3) Dr 75,000
To Equity Share Application A/c 75,000
(Being Application amount received on 25,000 shares)
Equity Share Application A/c Dr 75,000
To Equity share Capital A/c(20,000*3) 60,000
To Equity share Allotment A/c 12,000
To Bank A/c(1,000*3) 3,000
(Being Application amount on issued shares i.e., 20,000 shares transferred to capital A/c and application on 1000 shares refunded and remaining excess amount on application on 4,000 shares adjusted to allotment)
Equity Share Allotment A/c(20,000*7) Dr 1,40,000
To Equity Share Capital A/c(20,000*5) 1,00,000
To Securities Premium A/c(20,000*2) 40,000
Bank A/c (1,40,000-12,000-1,250) Dr 1,26,750
To Equity share Allotment A/c 1,26,750
Equity Share call A/c (20,000*2) Dr 40,000
To Equity share Capital A/c 40,000
Bank A/c (40,000-[200*2+100*2]) Dr 39,400
To Equity Share Call A/c 39,400
Equity Share Capital A/c (300*10) Dr 3,000
Securities Premium A/c (200*2) Dr 400
To Equity Share Allotment A/c [w.N.1] 1,250
To Equity Share call A/c (300*2) 600
To Equity Share Forfeiture A/c 1,550
Bank A/c (160*9+40*9) Dr 1,800
Equity Share Forfeiture A/c (160*1+40*1) Dr 200
To Equity Share Capital A/c 2,000
Equity Share Forfeiture A/c Dr 720
To Capital Reserve A/c 720
WORKING NOTES:
Here Mr. X was holding 200 shares so guess how many shares he would have applied for?
Applications received on shares = 25,000 Shares issued = 20,000
Completely Allotted shares = (4,000) Allotted = (4,000)
Shares refunded = (1,000) Remaining = 16,000
Remaining shares =20,000
Therefore, for 20,000 shares ---------------- 16,000 share are allotted
x shares ---------------- 200 shares are allotted
*.* Mr. X applied for 250 shares but, got 200 shares
Application amount received on Mr. X shares(250*3) = 750
Application amount required on allotted shares(200*3) = (600)
Excess amount on application = 150
Amount on allotment (200*7) due =1,400
Excess amount adjusted = (150)
Amount due on allotment =1,250
W.N.2 : Amount transferred to Capital reserve
Forfeiture amount for 200 shares = 150(excess on application [50*3]) + 600
= 750
Forfeiture amount For 200 shares ------------------------ 750
160 shares ------------------------ X
X = 600
Forfeiture amount for 100 shares = 1,550(total forfeiture amount on 300 shares - 750 ( forfeiture amount on 200 shares)
= 800 ( 100*3 + 100 *5)
Forfeiture amount on 100 shares ----------------------------- 800
40 shares ----------------------------- Y
Y = 320
Forfeiture amount on 160 shares = 600
loss on re-issue on discount = (160) [160*1]
profit on re-issue = 440
Forfeiture amount on 40 shares = 320
loss on re-issue = (40) [40*1]
profit on re-issue = 280
*.* Total profit on re-issue = 440+280
= 720
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