National heavy chemicals limited forfeited 500 shares of Rs.100 each issued at 10% premium (to be paid at the time of allotment)on which first call of rupees 30 per share was not received and the second and final call of rupees 20 per share was not yet called. give journal entries regarding forfeiture and reissue of shares in each of the following alternative cases :
(1.) if two hundred of these shares were reissued as rupees 80 paid up for rupees 90 per share.
(2.) if 200 of these shares were reissued as rupees 80 paid up for rupees 80 Per share
(3.)if two hundred of these shares were re issued as rupees 80 paid up for rs 70 Per share
(4.) if 200 of the shares were reissued as rupees 80 paid up for rupees 30 per share
(5.)if 200 of the shares were reissued as fully paid up for rupees 50 per share.
Answers
Explanation:
Forfeiture amount per share is the amount to be received by the company on forfeiture of each share.
ForfeitureAmount=ApplicationAmount
Substitute the values in above equation
ForfeitureAmount=Rs5
Forfeiture amount is the money received by company on forfeiture (cancellation of share) or on the reissue of share.
ForfeitureAmount=No.ofshares×ForfeitureAmount
Substitute the values in the above equation
ForfeitureAmount=200shares×Rs5=Rs1000
ForfeitureAmountfor100share=100shares×Rs5=Rs500
Forfeitureamountonreissue=100shares×Rs2=200
Profit on the reissue is the profit earned by the company when the forfeited shares are reissued
Profitonreissue=ForfeitedAmountonforfeiture−Forfeitedamountonreissue
Substitute the values in the above equation
Profitonreissue=Rs500−Rs200=Rs300
Hence, the profit earned on the reissue of shares is Rs 300.
Share Forfeiture a/c Dr. Rs300
To share capital a/ Rs300.
Share Capital A/c. Dr. (500 x 80) 40,000
To Calls in Arrears A/c. (500 x 30) 15,000
To Share Forfeiture A/c (500 x 50) 25,000
(500 shares forfeited)
1.)
Bank A/c Dr. (200 x 90) 18,000
To Share Capital A/c (200 x 80) 16,000
To Securities Premium A/c (200 x 10) 2,000
(Being 200 shares reissued as Rs.80 paid up at Rs.90 per share)
Share Forfeiture A/c Dr. (200 x 50) 10,000
To Capital Reserve A/c 10,000
(Being paid up value of Rs.50 on 200 shares transferred to Capital Reserve A/c)
2.)
Bank A/c Dr. (200 x 80) 16,000
To Share Capital A/c (200 x 80) 16,000
(Being 200 shares reissued as Rs.80 paid up at Rs.80 per share)
Share Forfeiture A/c Dr. (200 x 50) 10,000
To Capital Reserve A/c 10,000
(Being paid up value of Rs.50 on 200 shares transferred to Capital Reserve A/c)
3.)
Bank A/c Dr. (200 x 70) 14,000
Share Forfeiture A/c Dr. (200 x 10) 2,000
To Share Capital (200 x 80) 16,000
(Being 200 shares reissued as Rs.80 paid up at Rs.70 per share)
Share Forfeiture A/c Dr. (200 x 40) 8,000
To Capital Reserve A/c 8,000
(Being paid up value of Rs.50 on 200 shares less discount of Rs.10 per share transferred to Capital Reserve A/c)
4.)
Bank A/c Dr. (200 x 30) 6,000
Share Forfeiture A/c Dr. (200 x 50) 10,000
To Share Capital A/c (200 x 80) 16,000
(Being 200 shares reissued as Rs.80 paid up at Rs.30 per share)
Capital Reserve is 0
5.)
Bank A/c Dr. (200 x 50) 10,000
Share Forfeiture A/c Dr. (200 x 50) 10,000
To Share Capital (200 x 100) 20,000
(Being 200 shares reissued as fully paid up at Rs.50 per share)
Capital Reserve is 0