Record the journal entries for forfeited and reissue of shares in the following cases assuming that the company follows the policy of adjusting excess Application Money towards other sums due on shares:
i) Bharat Ltd. forfeited 600 shares of rupees 10 each issued at a premium of 30% to W who had applied for 1140 shares and paid an application money of rupees 5 ( including rupee 1 of premium), for non-payment of allotment money of rupees 5( including rupee 1 premium). At different intervals of time, out of these 100 shares were re-issued to X as rupees 8 called up for rupees 7 per share, 100 shares were re-issued to Y as rupees 8 paid up for rupees 9 per share and 400 shares were re-issued to Z, credited as fully paid up for rupees 9 per share.
ii) Tushar Ltd. forfeited 600 shares of rupees 10 each issued at a premium of 30% to W who had applied for 1500 shares for non-payment of first and final call money of rupees 3 (including rupee 1 premium). At different intervals of time, out of these 400 shares were re-issued to Z, credited as fully paid for rupees 9 per share and 100 shares were re-issued to X as rupees 10 paid up for rupees 11 per share.
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i)
Share Face Value = 10 (premium 30%)
Paid on App 1140 shares = 4 + 1 = 4560 + 1140 = 5700
Payable on App = 600 x (4+1) = 2400 + 600 = 3,000
Excess paid on app to be adjusted to allotment = 5700 – 3000 = 2700
Allotment 600 share = 4 + 1
Due on allotment = 600 x (4+1) = 2,400 + 600 = 3000
Amount unpaid on allotment = 3000 – 2700 = 300 premium
So Rs. 300 (0.5 per share) will be securities premium cancelled
Forfeit 600 share
Reissue = 100 shares to X as 8 called up for Rs.7
100 shares to Y as 8 paid up for Rs.9
400 shares to Z as 8 fully paid for Rs.9
Journal Entries in the books of Bharat Ltd.
Share Capital A/c Dr. (600 x 8) 4,800
Securities Premium A/c (600x0.5 unpaid) 300
To Share Forfeiture A/c (600 x 8) 4,800
To Calls in Arrears A/c = (600 x 0.5) 300
(600 Share forfeited due to non-payment of Allotment money)
Important Note: Securities premium reserve is cancelled if it is shown due but not received. Here it is debited by Rs0.5 per share since that is the only unpaid amount that is called and due.
1st 100 shares re-issued as rupees 8 called up for rupees 7 per share
Bank A/c Dr. (100 x 7) 700
Share Forfeiture A/c Dr. 100
To Share Capital A/c (100 x 8) 800
(100 Shares reissued for Rs.7 as Rs.8 called up)
2nd 100 shares re-issued as rupees 8 paid up for rupees 9 per share
Bank A/c Dr. (100 x 9) 900
To Share Capital A/c (100 x 8) 800
To Securities Premium A/c (100 x 1) 100
(100 shares re-issued for Rs. 9 as Rs. 8 paid up)
Important Note: All premium received on issue or reissue of shares are taken by Securities Premium Reserve whereas all discounts or loss on the issue is taken by Discount on issue of Shares A/c and on the reissue is suffered by Share Forfeiture A/c.
3rd 400 shares re-issued to Z, credited as fully paid up for rupees 9 per share
Bank A/c Dr. (400 x 9) 3,600
Share Forfeiture A/c Dr. (400 x 1) 400
To Share Capital A/c (400 x 10) 4,000
(400 shares re-issued for Rs. 9 as fully paid up)
Share Forfeiture A/c Dr. (4,800-100-400) 4,300
To Capital Reserve A/c 4,300
(Being balance of share forfeiture transferred to capital reserve account)
Important Note: In the case of Re-issue the meaning of paid-up value is the worth of share for example a share of Rs.10 is reissued for Rs. 9 or Rs.11, the paid-up value of the share will be Rs.10. Reissue as called up means what has been called till now and Share Capital Account will be credited with that called up value of shares reissued. Reissue as paid-up will credit Share Capital Account with the paid-up value of the number of shares reissued. If it is fully paid up or fully called up the Share Capital Account will be credited by the par value or nominal value of shares reissued. If paid-up value is not given, Share Capital Account will be credited with the called-up value which is assumed to be the paid-up value. In all these cases Share Capital A/c will not include any premium.
ii)
Shares Applied for: 1500
Share Issued / forfeited: 600
Pro-rata: 1500:600 = 5:2
Paid Value + premium = 7 + 2
Unpaid Value + premium = 3 + 1
Since Application and Allotment value is not specified, we assume that there is no excess payment to be adjusted in call money
Journal Entries in the books of Tushar Ltd.
Share Capital A/c Dr. (600 x 10) 6,000
To Share first and final call A/c (600 x 3) 1,800
To Share Forfeiture A/c (600 x 7) 4,200
(600 Shares forfeited for non-payment of first & final call money)
400 shares re-issued as fully paid for rupees 9 per share
Bank A/c Dr. (400 x 9) 3,600
Share Forfeiture A/c Dr. (400 x 1) 400
To Share Capital (400 x 10) 4,000
(400 Shares reissued at Rs.9 as fully paid up)
100 shares re-issued as rupees 10 paid up for rupees 11 per share
Bank A/c Dr. (100 x 11) 1,100
To Share Capital (100 x 10) 1,000
To Securities Premium A/c (100 x 1) 100
(100 Shares reissued at Rs.11 as Rs.10 paid up)
Share Forfeiture A/c Dr. (400 x 1) 3,800
To Capital Reserve A/c 3,800
(Excess in Share forfeiture transferred to Capital Reserve A/c)