Question

A company issued for public subscription 40,000 Equity Shares of ₹ 10 each at a premium of ₹ 2 per share payable as:
Applications were received for 60,000 shares. Allotment was made on pro rata basis to the applicants for 48,000 shares, the remaining applications being refused. Money overpaid on application was utilised towards sums due on allotment. Ram to whom 1,600 shares were allotted failed to pay the allotment money and Shyam to whom 2,000 shares were allotted failed to pay the two calls. These shares were subsequently forfeited after the second and final call was made. All the forfeited shares were reissued as fully paid-up @ ₹ 8 per share.
Give necessary Journal entries for the above transactions.

Answer 1

The necessary Journal entries for the given transactions are prepared below:

Explanation:

Issued capital 40,000 shares of Rs.10 each at premium of Rs.2

Applied 60,000 shares

Calculation of Ram's shares

No. of shares applied

$=\frac{\text { Applicaion }}{\text { Allotment }} \times \quad Ram Allotted$

$=\frac{48,000}{40,000} \times 1,600=1,920 \quad Shares$

$\begin{array}{l}\text { Money received on Application }(1,920 \times \mathrm{Rs} .2)=8.000 \\\\ \text {Less: Application money transferred to Share Capital }(1,600 \times \mathrm{Rs} .2)=3,200 \\ \\\text { Excess money on Application }=Rs .640}\end{array}$

Calls-in-Arrears on Allotment

Share Allotment due ( 1,600 shares $\times$ Rs. 5 ) - Excess money on Application

$=8,000-640=\mathrm{Rs} .7,360$