Hindustans Steel Ltd. invited applications for 50,000 equity shares of Rs. 10 each at a premium of Rs. 4 per share. The amount was payable as follows :
On ApplicationOn AllotmentOn First and Final CallRs. 4 (including premium Rs. 2)Rs. 6 (including premium Rs. 2)BalanceOn ApplicationRs. 4 (including premium Rs. 2)On AllotmentRs. 6 (including premium Rs. 2)On First and Final CallBalance
Applications for 60,000 shares were received. Allotment was made to all the applicants on pro-rata basis. Excess application money was adjusted towards sums due on allotment. Ram, to whom 500 shares were allotted, failed to pay allotment and call money. Shyam, to whom 1,000 shares were allotted, failed to pay the call money. These shares were forfeited. Out of the forfeited shares 1,200 shares (including all shares of Shyam) were re-issued at 10% discount as fully paid-up. Pass the necessary journl entries in the books of the company by opening 'Calls in Arrears AS/c' wherever necessary.
Answers
Working notes:
1. Excess application money adjusted on allotment =(60000-50000) * Rs 4=Rs 40000
2. Amount not received from defaulter shareholders (Call-in-Arrears):
Calculation for RAM
Shares allotted to Ram=500
Shares applied for by Ram=500*60000/50000=600
Application money received =600*4=2400
Application money due on shares allotted =500*4=2000
Excess Application money adjusted on allotment-Rs 2400-Rs.2000=Rs 400
Allotment money due on shares allotted = 500*6=3000
Allotment money due but not received (Calls-in-Arrears) Rs. 3000-Rs 400=Rs 2600
Call money due but not received = 500*4 = Rs 2000
Calculation for SHYAM
Shares allotted to Shyam= 1000
Shares applied for by Shyam=1000*60000/50000= 1200
Call money due but not received = 1000*4 = Rs 4000
3. Calculation of amount received on allotment later on:
Total allotment money due (50,000x Rs. 6)=Rs.3,00,000
Less: Excess application money adjusted (WN 1)(40,000)
260000
Less: Allotment money due but not received (WN 2) (2600)
Amount received on Allotment 257400
3. Calculation of amount received on first and final Call later on:
Total first and final Call money due (50,000* Rs. 4)=Rs.2,00,000
Less: first and final Call money due but not received [4000+2000] (6000)
Amount received on first and final Call 194000
4. Calculation of amount transferred to Capital Reserve:
(calculated for 1200 shared which are reissued)
Amount forfeited on reissued shares (1200/1500* 12400) = 9920
Less: Reissue Discount (1200x Rs. 1) (1200)
Gain on reissue transferred to Capital Reserve = 8720
Journal entries
Bank a/c (60000*4) Dr. 2,40,000
To Equity share application A/c 2,40,000
(Being share application money received)
Equity share application A/c Dr. 2,40,000
To Equity share capital A/c (50000*2) 1,00,000
To security Premium A/c (50000*2) 1,00,000
To Equity share Allotment A/c 40,000
(Being adjustment of application money)
Equity share Allotment A/c (50000*6) Dr. 3,00,000
To Equity share capital A/c (50000*4) 2,00,000
To security Premium A/c (50000*2) 1,00,000
(Being allotment money due)
Bank A/c Dr. 257400
To Equity share Allotment A/c 257400
(Being the remaining allotment money received on 49500 shares)
Equity share first and final Call A/c Dr. 200000
To Equity share capital A/c 200000
(Being first and final Call money due)
Bank A/c Dr. 194000
To Equity share first and final Call A/c 194000
(Being the first and final Call money received on 48500 shares)
Equity share Capital A/c (1500*10) Dr. 15000
Securities Premium A/c (1500*4) Dr. 6000
To Forfeited shares A/c 12400
To Equity share Allotment A/c 2600
To Equity share first and final Call A/c 6000
(Being 1500 shares forfeited for non-payment of allotment and call money)
Bank A/c Dr. 10800
Forfeited shares A/c Dr. 1200
To Equity share capital A/c 12000
(Being 1200 fully paid shares reissued @ Rs 9 each)
Forfeited shares A/c Dr. 8720
To Capital reserve 8720
(Being the balance of forfeited shares a/c transferred to capital reserve )
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