Vinod Papers Ltd. invited applications for issuing 1,00,000 shares of Rs 10 each at a
premium of Rs 4 per share payable as follows:
On Application Rs 4 (including premium Rs 2)
On Allotment Rs 4 (including premium Rs 2)
On First & Final Call Rs 6
Applications were received for 1,30,000 shares and pro-rata allotment was made to all
applicants as follows:
(i) Applicants for 80,000 shares were allotted 60,000 shares, and
(ii) Applicants for 50,000 shares were allotted 40,000 shares.
X, who belonged to the first category and was allotted 900 shares failed to pay the
allotment and call money.
Y, who belonged to the second category and who applied for 1,000 shares also failed to
pay the allotment and call money. Their shares were forfeited and 1,400 of the forfeited
shares were re-issued @ Rs 9 per share as fully paid. Re-issued shares included whole of
Y's shares.
Pass necessary journal entries in the books of Vinod Papers Ltd.
Answers
Application Entries
Bank A/c Dr. (1,30,000 x 4) 5,20,000
To Equity Share Capital A/c (1,30,000 x 4) 5,20,000
(Being application money received on 1,30,000 shares)
Equity Share Application A/c Dr. 5,20,000
To Securities Premium A/c (1,00,000 x 2) 2,00,000
To Equity Share Capital A/c (1,00,000 x 2) 2,00,000
To Share Allotment A/c (30,000 x 4) 1,20,000
(Being application money adjusted)
Allotment Entries
Share Allotment A/c Dr. (1,00,000 x 4) 4,00,000
To Equity Share Capital A/c 2,00,000
To Securities Premium Reserve A/c 2,00,000
(Being allotment money due)
Note1
X’s Share Forfeiture
X got 900 share in 1st category of 4:3
Applied for 1200 shares
Adjusted to Allotment A/c for X= Actual received on application – Actual due on application
= 4,800 – 3,600
= 1,200
X applied for 900 x 4/3 = 1200 shares
Forfeiture Amount of X = (Total money received – Premium on allotted shares – premium payable on allotment) of forfeited shares
= 1200 x (2 + 2) – 900 x 2 - 1800
= 4,800 – 1,800 - 1800
= 1200
Balance due on Allotment for forfeited shares of X = (Allotted Shares x Allotment value) - Adjusted to Allotment A/c
(900 x 4) – 1200 = 3,600 – 1200
= 2400
Note2
Y’s Share Forfeiture
Y applied for 1,000 shares in 2nd category of 5:4
Allotted 800 shares
Adjusted to Allotment A/c for Y= Actual received on application – Actual due on Application
= 4,000 – 3,200
= 800
Forfeiture Amount of Y = (Total money received – Premium on allotted shares – premium payable on allotment) of forfeited shares
= 1000 x (2 + 2) – 800 x 2 - 1600
= 4,000 – 1,600 - 1600
= 800
Balance due on Allotment for forfeited shares of Y = (Allotted Shares x Allotment value) - Adjusted to Allotment A/c
(800 x 4) – 800 = 3,200 – 800
= 2400
Balance Received on Allotment = Allotment amount on allotted shares – Excess Application money adjusted to Allotment – Balance due on the allotment for forfeited shares
(1,00,000 x 4) – 1,20,000 – 4,800 = 2,75,200
Bank A/c Dr. (2,80,000 – 4800) 2,75,200
Calls in Arrears A/c Dr. 4,800
To Equity Share Allotment A/c 2,80,000
(Being allotment money received except advance adjusted on application and 1,700 forfeited shares)
First & Final Call Entries
Share first & final call A/c Dr. (1,00,000 x 6) 6,00,000
To Equity Share Capital A/c 6,00,000
(Being Call money due)
Bank A/c Dr. (6,00,000 – 5,400 - 4,800) 5,89,800
Call in Arrears A/c Dr. 10,200
To Share first & final call A/c (1,00,000 x 6) 6,00,000
(Being call money received except on 1,700 shares)
Forfeiture Entry
Equity Share Capital A/c Dr. 1700 x 10 17,000
To Share Forfeiture A/c 2,000
To Call in Arrears A/c 15,000
(Being 1700 shares forfeited for non-payment of allotment money and call money)
Re-issue Entry (800 shares of Y and 600 shares of X)
Bank A/c Dr. (800 x 9) 12,600
Share Forfeiture A/c Dr. 1,400
To Equity Share Capital A/c 14,000
(Being forfeited shares re-issued at Rs 7 per share)