Following particulars are given from the books and records of Vinod Ltd., Relating to
issue and forfeiture of Equity shares during January to April,2008. The amount per
share was payable as under:
On Application Rs.3 per share
On Allotment Rs.5 per share (including Rs.2 premium)
On First & Final Call Rs.4 per share
No. of shares Allotted No.of Shares Applied
Category I 20,000 30,000
Category II 10,000 10,000
Category III Nil 5,000(Money refunded)
Mr. Giri who applied for 450 shares in category I failed to pay allotment and call
money and his shares were forfeited by the Directors. Subsequently 200 forfeited
shares were reissued to Mr. Bajwa as fully paid for Rs.9 per share . Prepare cash
book and give journal entries.
Answers
Given:
amount per share was payable as:
On Application Rs.3 per share
On Allotment Rs.5 per share (including Rs. 2 premium)
On First & Final Call Rs.4 per share
No. of shares Allotted No.of Shares Applied
Category I 20,000 30,000
Category II 10,000 10,000
Category III Nil 5,000(Money refunded)
Mr. Giri who applied for 450 shares in category I failed to pay allotment and call money and his shares were forfeited. Then 200 forfeited shares were reissued to Mr. Bajwa as fully paid @ Rs.9 per share.
To find:
Pass Journal entries.
Prepare cash book.
solution:
Working notes:
1. Excess application money adjusted on allotment =(45,000-30,000)x Rs 3=Rs 45,000
2. Amount not received from defaulter shareholders (Call-in-Arrears):
Shares allotted to him=20000/30000*450=300
Application money received =450 *Rs. 3= Rs. 1350
Application money due on shares allotted =300* Rs.5=Rs 1500
Excess Application money adjusted on allotment-Rs 1350-Rs.900=Rs 450
Allotment money due on shares allotted = 300 xRs. 5= Rs 1500
Allotment money due but not received (Calls-in-Arrears) Rs. 1500-Rs 450=Rs 1050
3.Calculation of amount received on allotment later on:
Total allotment money due (30,000x Rs. 5)= Rs.1,50,000
Less: Excess application money adjusted (WN 1) (45,000)
1,05,000
Less: Allotment money due but not received (WN 2) (1,050)
Amount received on Allotment 1,03,950
4. Calculation of amount transferred to Capital Reserve:
(calculated for 200 shared which are reissued)
Amount forfeited on reissued shares (200/300*1350) 900
Less: Reissue Discount (200x Rs. 1) (200)
Gain on reissue transferred to Capital Reserve 700
Journal entries:
Bank a/c (45000*3) Dr. 135000
To Equity share application A/c 135000
(Being share application money received)
Equity share application A/c Dr. 135000
To Equity share capital A/c (30000*3) 90000
To Equity share Allotment A/c 30000
To bank A/c (5000*3) 15000
(Being adjustment of application money)
Equity share Allotment A/c (5*30000) Dr. 1,50,000
To Equity share capital A/c (3*30000) 90,000
To security Premium A/c (2*30000) 60,000
(Being allotment money due)
Bank A/c Dr. 1,03,950
To Equity share Allotment A/c 1,03,950
(Being the remaining allotment money received on 29700 shares)
Equity share first and final Call A/c Dr. 1,20,000
To Equity share capital A/c 1,20,000
(Being first and final Call money due)
Bank A/c Dr. 1,18,800
To Equity share first and final Call A/c 1,18,800
(Being the first and final Call money received on 29700 shares)
Equity share Capital A/c Dr. 3,000
Securities Premium A/c Dr. 600
To Equity share Allotment A/c 1,050
To Forfeited shares A/c 1,350
To calls in arrears 1,200
(Being 300 shares forfeited for non-payment of allotment and call money)
Bank A/c (9*200) Dr. 1,800
Forfeited shares A/c Dr. 200
To Equity share capital A/c 2,000
(Being 200 fully paid shares reissued @Rs9 each)
Forfeited shares A/c Dr. 700
To Capital reserve 700
(Being the balance of forfeited shares a/c transferred to capital reserve (WN4))
Cash book:
Please refer to the attached screenshot.
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