Ashoka Limited Company which had issued equity shares of Rs 20 each at a discount of Rs 4 per share, forfeited 1,000 shares for non-payment of final call of Rs 4 per share. 400 of the forfeited shares are reissued at Rs 14 per share out of the remaining shares of 200 shares reissued at Rs 20 per share. Give journal entries for the forfeiture and reissue of shares and show the amount transferred to capital reserve and the balance in Share Forfeiture Account.
Answers
Given : Ashoka Limited Company which had issued equity shares of Rs 20 each at a discount of Rs 4 per share, forfeited 1,000 shares for non-payment of final call of Rs 4 per share. 400 of the forfeited …...
Solution :
Issue of shares of discount is not in syllabus. As per companies act 2013, the shares cannot be issued and reissued at discount (except for sweat equity shares) under section 53.
Concept :
ISSUE OF SHARES AT DISCOUNT :
Shares are said to be issued at discount the issue price is less than the face value /par value of a share. Section 53 of the companies Act ,2013 prohibits issue of shares at discount provided if shares are issued under section 54 as sweat equity shares to the directors and employees only.
Equity shares mean that part of the share capital of the company which are not preference shares.They are entitled to dividend only after preferential shareholders and they can get their capital back only after paying off preference shareholders. Equity shareholders have voting rights and they control the affairs of the company.
Forfeiture of shares :
If any shareholder fails to pay the amount due on allotment or any call within the specified period , the directors may cancel his shares and forfeit the received amount . This is known as forfeiture of shares.
Accounting entries on forfeiture of shares :
On forfeiture of shares 'Share capital A/c' is debited within the amount which has been called so far. Amount already paid on the shares is forfeited and credited to 'Share Forfeiture A/c'. Amount called on allotment but not paid is credited to calls in arrears account.
Re issue of shares :
Forfeited shares can be reissued by the company at any time as Board of Directors has power to reissue forfeited shares at terms which the board thinks fit. These shares may be issued at par, premium on loss.
Hope this answer will help you..
Some more questions of this chapter :
Y.Ltd. issued 2,000, 6% Debentures of Rs 100 each payable as follows Rs 25 on application; Rs 50 on allotment and Rs 25 on First and Final call.
https://brainly.in/question/17093300
X.Ltd. invites application for the issue of 10,000, 14% debentures of Rs 100 each payable as to Rs 20 on application, Rs 60 on allotment and the balance on call. The company receives applications for 13,500 debentures, out of which applications for ……...
https://brainly.in/question/17093302