Question

Sargam Ltd. invited applications for issuing 80,000 equity shares of 100 each at a
premium. The amount was payable as follows:
On Application- 20 per share;
On Allotment-260 (including premium) per share;
On First and Final Call - 40 per share.
Applications for 1,20,000 shares were received. Allotment was made on pro rata basis to all
the applicants. Excess money received on applications was adjusted on sums due on
allotment. Sitaram, who had applied for 6,000 shares, failed to pay the allotment money
and Harnam did not pay first and final call on 800 shares allotted to him. The shares of
Sitaram and Harnam were forfeited. 4,200 of these shares were reissued for 100 per share
as fully paid-up. The reissued shares included all the forfeited shares of Harnam.
Pass necessary Journal entries for the above transactions in the books of Sargam Ltd.

Answer 1

Answer:

JOURNAL

<th scope="col">

i

Bank A/c (1,20,000 × 20) Dr.

.

24,00,000

.

. To Equity Share Application A/c . . 24,00,000

. (Being application money received.) . . .

ii Equity Share Application A/c (1,20,000 × 20) Dr. 24,00,000 .

. To Equity Share Capital A/c (80,000 × 20) . . 16,00,000

To Equity Share Allotment A/c (40,000 × 20) . 8,00,000

. (Being application money transferred.) . . .

iii Equity Share Allotment A/c (80,000 × 60) Dr. 48,00,000 .

. To Equity Share Capital A/c (80,000 × 40) . . 32,00,000

. To Securities Premium Reserve A/c (80,000 × 20) . . 16,00,000

. (Being allotment money due.) . . .

iv Bank A/c (48,00,000 - 8,00,000 - 2,00,000) Dr. 38,00,000 .

. To Equity Share Allotment A/c . . 38,00,000

. (Being allotment money received.) . . .

v Equity Share First and Final Call A/c Dr. 32,00,000 .

. To Equity Share Capital A/c (80,000 × 40) . . 32,00,000

. (Being first and final call money due.) . . .

vi Bank A/c [80,000-4,000-800) × 40] Dr. 30,08,000 .

. To Equity Share First and Final Call A/c . . 30,08,000

. (Being first and final call money received.) . . .

vii Equity Share Capital A/c (4,800 × 100) Dr. . 4,80,000 .

. Securities Premium Reserve A/c (4,000 × 20) Dr. . 80,000 .

. To Share Forfeiture A/c (6,000 × 20) + (800 × 60) . . 1,68,000

. To Equity Share Allotment A/c . . 2.00.000

. To Equity Share First and Final Call A/c (4,800 × 40) . . 1.92.000

. (Being shares forfeited for non-payment.) . . .

viii Bank A/c (4,200 × 100) Dr. . 4,20,000 .

. To Equity Share Capital A/c . . 4,20,000

(Being shares reissued @ Rs. 100 per shares.) . . .

ix Share Forfeiture A/c . 1,50,000 .

. To Capital Reserve A/c . . 1,50,000

. (Being share forfeiture to capital reserve account.) . .

Working Note

Calculation of allotment money not paid by Sitaram

Number of shares allotted to Sitaram =80,0001,20,000×6,000=4,000 shares

Money not paid on allotment Amt (Rs.)

Money paid on application (6,000 × 20) 1,20,000

(-) Amount adjusted on allotment (4,000 × 20) (80,000)

Excess application money adjusted on allotment 40,000

Money due on allotment (4,000 × 60) 2,40,000

(-) Excess application money adjusted (40,000)

Money not paid on allotment by Sitaram 2,00,000

Money received on allotment

Total amount due on allotment (80,000 × 60) 48,00,000

(-) Excess application money adjusted (8,00,000)

. 40,00,000

(-) Money not received from Sitaram on allotment (2,00,000)

. 38,00,000

Amount forfeited on Sitaram 3,400 shares =1,20,000×3,4004,000 1,02,000

Amount forfeited on Hamam’s 800 shares 48,000

. 1,50,000